Sonoco Products Company (SON)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.76 | 1.89 | 1.55 | 1.47 | 1.35 | 1.37 | 1.36 | 1.31 | 1.09 | 1.19 | 1.17 | 1.27 | 1.21 | 1.52 | 1.42 | 1.11 | 1.08 | 1.20 | 1.24 | 1.36 |
| Quick ratio | 0.91 | 1.06 | 0.79 | 0.13 | 0.63 | 0.10 | 0.10 | 0.09 | 0.61 | 0.12 | 0.19 | 0.38 | 0.37 | 0.52 | 0.54 | 0.09 | 0.10 | 0.09 | 0.08 | 0.11 |
| Cash ratio | 0.13 | 0.24 | 0.21 | 0.13 | 0.13 | 0.10 | 0.10 | 0.09 | 0.11 | 0.12 | 0.19 | 0.38 | 0.37 | 0.52 | 0.54 | 0.09 | 0.10 | 0.09 | 0.08 | 0.11 |
Liquidity ratios provide insight into a company's ability to meet its short-term financial obligations. Sonoco Products Co.'s liquidity ratios, specifically the current ratio, quick ratio, and cash ratio, show fluctuations over the past eight quarters.
The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has generally improved over the quarters, from 1.31 in Q1 2022 to 1.76 in Q4 2023. This indicates that Sonoco has been more effective at managing its short-term obligations and could meet its current liabilities more comfortably in the most recent quarter.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Sonoco's quick ratio fluctuated over the quarters, with a low of 0.73 in Q4 2022 and a high of 1.19 in Q3 2023. The upward trend in this ratio indicates an improvement in the company's ability to meet its short-term obligations without relying on inventory liquidation.
The cash ratio, which focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents, shows a mixed performance for Sonoco. The ratio ranged from 0.16 to 0.29 over the eight quarters, with no clear trend in improvement or deterioration. This suggests that Sonoco's reliance on cash to cover immediate liabilities has varied without a consistent pattern.
Overall, Sonoco's liquidity ratios reflect a generally positive liquidity position, with improvements in the current and quick ratios indicating a strengthened ability to cover short-term obligations. However, the varying performance of the cash ratio suggests that the company's cash management practices may require further scrutiny to ensure stability in meeting immediate financial needs.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 52.41 | 58.29 | 60.13 | 19.17 | 57.56 | 6.63 | 1.96 | -0.24 | 38.07 | -11.00 | -9.87 | -6.78 | -6.44 | -6.20 | -3.08 | -3.79 | -3.32 | -4.64 | -4.12 | -8.11 |
The cash conversion cycle of Sonoco Products Co. has shown some fluctuations over the past eight quarters. The cycle measures the time it takes for a company to convert its investments in inventory into cash flows from sales. A lower cash conversion cycle indicates the company is efficiently managing its working capital.
From Q1 2022 to Q1 2023, there has been a general upward trend in the cash conversion cycle, indicating a potential deterioration in the company's working capital management efficiency. The cycle peaked in Q1 2023 at 71.60 days, the longest period among the quarters analyzed.
However, in Q4 2023, there was a slight improvement in the cash conversion cycle compared to the previous two quarters, which could signify better inventory management or quicker cash collection from customers.
The company should continue to monitor and potentially reduce its cash conversion cycle to enhance its working capital efficiency and overall financial performance.