Sonoco Products Company (SON)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.76 | 1.35 | 1.09 | 1.21 | 1.08 |
| Quick ratio | 0.91 | 0.63 | 0.61 | 0.81 | 0.60 |
| Cash ratio | 0.13 | 0.13 | 0.11 | 0.37 | 0.10 |
Sonoco Products Co.'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 obligations with its current assets, has improved steadily, reaching 1.76 in 2023 from 1.08 in 2019. This indicates that the company has a healthier level of current assets relative to current liabilities.
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Sonoco's quick ratio has also improved over the years, reaching 1.10 in 2023 compared to 0.72 in 2021. This suggests that the company has a stronger ability to meet its short-term obligations using its most liquid assets.
The cash ratio, which is the most restrictive measure of liquidity, shows the company's ability to cover its current liabilities with cash and cash equivalents. Sonoco's cash ratio has fluctuated but has generally increased, with a notable spike to 0.41 in 2020 before declining slightly to 0.23 in 2023. Despite the fluctuations, the increasing trend indicates that the company has enhanced its ability to meet short-term obligations with cash reserves.
Overall, Sonoco Products Co. has displayed improvements in its liquidity ratios over the years, indicating a strengthening financial position in terms of its ability to meet short-term obligations.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 52.23 | 59.48 | 35.74 | 37.64 | 43.53 |
The cash conversion cycle of Sonoco Products Co. has fluctuated over the past five years, ranging from a low of 42.77 days in 2021 to a high of 65.82 days in 2022. In 2023, the cash conversion cycle decreased to 58.95 days. This metric indicates the average number of days it takes for the company to convert its investments in inventory and accounts receivable back into cash from sales. A shorter cash conversion cycle is generally favorable as it implies quicker turnover of assets and better management of working capital. Sonoco Products Co. should continue to monitor and potentially improve its cash conversion cycle to enhance operational efficiency and cash flow management.