Standard Motor Products Inc (SMP)

Standard Motor Products Inc's current ratio has shown fluctuation over the past five years, starting at 1.98 in 2020, dropping to 1.49 in 2021, and then recovering to 2.36 in 2022 and further to 2.45 in 2023. However, there was a slight decline to 2.11 in 2024.

The quick ratio, which indicates the company's ability to meet its short-term obligations with its most liquid assets, has been consistently low over the years, with values ranging from 0.05 to 0.11. This suggests that Standard Motor Products Inc may have difficulty covering its current liabilities with its quick assets alone.

Similarly, the cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has also remained low and relatively stable at around 0.05 to 0.11.

Overall, while the current ratio indicates a generally healthy liquidity position for Standard Motor Products Inc, the low quick ratio and cash ratio suggest that the company may have some challenges meeting its short-term obligations using its most liquid assets. Continued monitoring of these ratios is essential to ensure the company's liquidity remains stable.

---

Additional liquidity measure

Standard Motor Products Inc's cash conversion cycle has shown a slight increase over the past five years, starting at 168.29 days on December 31, 2020, and reaching 219.21 days by December 31, 2024. This upward trend indicates that the company is taking longer to convert its investments in raw materials into cash from sales.

The cash conversion cycle measures the time it takes for a company to convert its investment in inventory and other resources into cash inflows from sales. A longer cash conversion cycle suggests that the company may be facing challenges in efficiently managing its working capital, which could potentially lead to liquidity issues or increased financing costs.

Standard Motor Products Inc should closely monitor its cash conversion cycle to identify inefficiencies in its operations that may be prolonging the time it takes to convert inventory investments into cash. By improving inventory management, accounts receivable collection, and accounts payable management, the company can optimize its cash flow and enhance its overall financial performance.