Scotts Miracle-Gro Company (SMG)

Based on the provided data, Scotts Miracle-Gro Company's liquidity ratios have shown some fluctuations over the past five years.

The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has decreased from 2.06 in 2022 to 1.31 in 2024. This indicates a weakening ability to meet its short-term obligations with its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Scotts Miracle-Gro Company's quick ratio has also seen a declining trend, from 0.52 in 2022 to 0.33 in 2024, suggesting a decrease in the company's ability to meet its short-term obligations without relying on inventory.

The cash ratio, which reflects the company's ability to cover its short-term liabilities with cash and cash equivalents, has been volatile over the years. It reached its peak in 2022 at 0.21 but decreased to 0.10 in 2024. This implies that the company may have a lower level of cash reserves to cover its short-term obligations in 2024 compared to previous years.

Overall, the declining trends in current ratio, quick ratio, and cash ratio indicate that Scotts Miracle-Gro Company may be facing challenges in managing its short-term liquidity position. It would be important for the company to closely monitor its liquidity ratios and take appropriate measures to ensure it maintains a healthy liquidity position for its operations and growth.

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Additional liquidity measure

The cash conversion cycle of Scotts Miracle-Gro Company has shown a fluctuating trend over the past five years. In the fiscal year ending September 30, 2024, the company's cash conversion cycle decreased significantly to 54.74 days, reflecting an improvement in the efficiency of its cash management processes.

Comparing this to the previous year, the cycle was notably longer at 94.13 days in September 2023, indicating a slower conversion of inventory into cash. The trend continued in the years prior, with the cash conversion cycle standing at 106.81 days in September 2022, 80.67 days in September 2021, and 66.05 days in September 2020.

This variability in the cash conversion cycle suggests that Scotts Miracle-Gro Company may have experienced challenges in managing its working capital effectively in some periods, leading to delays in converting inventory into cash. However, the recent improvement in the cash conversion cycle in 2024 is a positive sign of enhanced operational efficiency and potentially more effective cash flow management strategies being implemented by the company.