Sonoco Products Company (SON)

Sonoco Products Company's liquidity ratios show fluctuating trends over the years. The current ratio, which indicates the company's ability to cover its short-term obligations with its current assets, decreased from 1.21 in 2020 to 0.79 in 2024. This downward trend may raise concerns about the company's short-term liquidity position.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, remained relatively low and stable at around 0.11 to 0.13 from 2020 to 2024. This suggests that Sonoco may face challenges in meeting its immediate obligations without relying on inventory liquidation.

The cash ratio, which measures a company's ability to cover its short-term liabilities using only cash and cash equivalents, mirrored the quick ratio trend, also holding steady at around 0.11 to 0.13 from 2020 to 2024. This indicates that Sonoco may have limited cash reserves available to meet its short-term obligations without relying on other current assets.

Overall, the liquidity ratios of Sonoco Products Company suggest a potential strain on its short-term financial health, particularly highlighted by the decreasing current ratio and the consistently low quick and cash ratios. This situation may warrant closer monitoring to ensure the company's ability to meet its short-term financial commitments.

---

Additional liquidity measure

The cash conversion cycle for Sonoco Products Company has shown some fluctuation over the past five years. In December 2020, the cycle was 39.25 days, indicating that it took approximately 39.25 days for the company to convert its investments in inventory into cash receipts from customers.

By the end of December 2021, the cash conversion cycle had increased to 45.31 days, suggesting a slight delay in the conversion process. However, in December 2022, there was a significant jump in the cycle to 69.23 days, reflecting a longer period for the company to generate cash from its operating activities.

In the subsequent years, the cash conversion cycle decreased to 52.87 days by December 2023 and then increased again to 89.03 days by December 2024. These fluctuations indicate potential challenges in managing inventory levels, collection of receivables, and payment of payables efficiently.

Overall, the trend in the cash conversion cycle for Sonoco Products Company shows variability, and the company may benefit from optimizing its working capital management practices to improve cash flow efficiency and operational performance.