Standard Motor Products Inc (SMP)

Standard Motor Products Inc's liquidity ratios show a generally positive trend over the past few years.

The current ratio has been increasing steadily from 1.68 as of March 31, 2020, to 2.11 as of December 31, 2024. This indicates that the company's current assets are more than sufficient to cover its current liabilities, providing a good margin of safety.

Similarly, the quick ratio, which excludes inventory from current assets, has also shown improvement, moving from 0.04 on March 31, 2020, to 0.10 on December 31, 2024. This suggests that the company has enough liquid assets to meet its short-term obligations without relying on inventory.

The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has followed a similar upward trend, reaching 0.10 on December 31, 2024, from 0.04 on March 31, 2020.

Overall, Standard Motor Products Inc's liquidity position appears to be strong and improving, as indicated by its increasing current, quick, and cash ratios over the years. This bodes well for the company's ability to meet its short-term financial commitments and manage any unexpected liquidity needs.

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Additional liquidity measure

Standard Motor Products Inc's cash conversion cycle has shown some fluctuations over the past few years. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

From March 31, 2020, to December 31, 2024, the cash conversion cycle ranged from a low of 156.71 days in September 30, 2020, to a high of 224.40 days in December 31, 2024. Generally, a shorter cash conversion cycle indicates that a company is managing its working capital more efficiently and is able to quickly convert its resources into cash.

It is observed that there were periods when the cash conversion cycle was relatively high, such as in December 31, 2021, March 31, 2022, and June 30, 2022, where the company took longer to convert investments into cash. This may indicate issues with inventory management, sales collection, or payment processes during those periods.

Conversely, the company improved its cash conversion cycle efficiency in some quarters, like in September 30, 2020, and September 30, 2023, where it took fewer days to convert investments into cash. This improvement could be due to better inventory control, faster sales cycles, or enhanced working capital management practices.

Overall, monitoring the cash conversion cycle can provide insights into a company's operational efficiency, liquidity management, and working capital performance over time, helping investors and analysts assess the company's financial health and management effectiveness.