Scotts Miracle-Gro Company (SMG)

The current ratio measures a company's ability to cover its short-term liabilities with its short-term assets. Scotts Miracle-Gro Company's current ratio has fluctuated over the past five years, ranging from 1.28 to 2.06. A higher current ratio indicates a stronger ability to meet short-term obligations. Although the ratio decreased from 2022 to 2023, it still remains at a healthy level, indicating the company's improved liquidity position.

The quick ratio, also known as the acid-test ratio, provides a measure of a company's ability to meet its short-term obligations using its most liquid assets. Scotts Miracle-Gro Company's quick ratio has varied between 0.63 and 0.81 in the past five years, showing some fluctuation. A higher quick ratio is generally preferred, as it implies the company has a more secure ability to cover its short-term liabilities without relying on inventory sales.

The cash ratio measures a company's ability to cover its short-term liabilities with its most liquid assets, which are cash and cash equivalents. Scotts Miracle-Gro Company's cash ratio has ranged from 0.10 to 0.36 over the past five years, indicating some variability. A higher cash ratio signifies a stronger ability to cover short-term liabilities using cash and cash equivalents. Despite the fluctuations, the company has exhibited an improved ability to cover its short-term obligations with its cash and cash equivalents.

Overall, Scotts Miracle-Gro Company's liquidity ratios demonstrate fluctuations over the years, but the company generally maintains a favorable liquidity position, with the ability to meet its short-term obligations using its current and liquid assets. It is important to note that while the company's liquidity ratios have shown variability, they still generally indicate a healthy liquidity position.

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Additional liquidity measure

The cash conversion cycle (CCC) of Scotts Miracle-Gro Company has fluctuated over the past five years. In the most recent period ending September 30, 2023, the CCC stood at 113.35 days, indicating an increase from the previous year. This trend contrasts with the decrease observed between 2021 and 2022. The CCC for 2023 suggests that the company takes approximately 113.35 days to convert its resource inputs into cash flows from sales, reflecting a longer operating cycle.

Comparing this to earlier years, there has been a notable increase from 2021 to 2022, where the CCC rose to 151.50 days, signifying a considerable extension in the cycle. The CCC was notably lower in 2021 at 90.84 days, and this followed an increase from 74.36 days in 2020. Additionally, in 2019, the CCC was 104.86 days, portraying a longer operating cycle compared to 2021 but lower relative to 2022 and 2023.

The fluctuation in the CCC over these years indicates changes in the company's efficiency in managing its working capital, inventory, and accounts receivable. A longer cash conversion cycle may imply increased investment in working capital, potentially leading to higher financing costs and reduced liquidity, while a shorter cycle can indicate improved efficiency and faster cash conversion.

Overall, the trend of the cash conversion cycle for Scotts Miracle-Gro Company reflects fluctuations in the efficiency of its working capital management and the time it takes to generate cash from its operating activities.