Simpson Manufacturing Company Inc (SSD)

The liquidity ratios of Simpson Manufacturing Co., Inc. show a consistent trend over the past five years.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has generally been healthy and increasing over the years. The ratio was 3.63 in 2023, indicating that the company had $3.63 in current assets for every $1 in current liabilities. This suggests that Simpson Manufacturing Co., Inc. is capable of meeting its short-term obligations comfortably.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Simpson Manufacturing Co., Inc.'s quick ratio has also shown a positive trend, although it is slightly lower than the current ratio. In 2023, the quick ratio stood at 2.11, meaning that the company had $2.11 in liquid assets that could be quickly converted to cash for every $1 of current liabilities.

The cash ratio, the most conservative liquidity ratio, focuses solely on the company's cash and cash equivalents compared to current liabilities. Simpson Manufacturing Co., Inc.'s cash ratio has generally been stable over the years, with a slight increase from 1.01 in 2022 to 1.32 in 2023. This indicates that the company had $1.32 in cash and cash equivalents for every $1 of current liabilities in 2023, highlighting its ability to meet its short-term obligations with its readily available cash resources.

Overall, based on the liquidity ratios analysis, it can be inferred that Simpson Manufacturing Co., Inc. has maintained a strong liquidity position, with ample current assets to cover its short-term obligations, even after excluding inventory from the calculation. This indicates that the company is well-positioned to meet its financial commitments in the near term.

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Additional liquidity measure

The cash conversion cycle of Simpson Manufacturing Co., Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased to 185.34 days from 189.02 days in 2022. This improvement may suggest that the company is managing its cash flow more efficiently, possibly by reducing the time it takes to convert its investments in inventory and accounts receivable into cash.

Comparing 2023 to 2021 and 2019, where the cash conversion cycle was significantly higher at 226.04 days and 168.55 days respectively, it is evident that the company has experienced both longer and shorter cash conversion cycles in recent years. The fluctuations could be attributed to changes in the company's operating efficiency, management of inventory, accounts receivable, and accounts payable.

Overall, analyzing the trend of Simpson Manufacturing Co., Inc.'s cash conversion cycle over the past five years indicates that the company has been able to improve its cash conversion efficiency compared to previous years. However, it would be important for the company to continue monitoring and managing its cash conversion cycle effectively to ensure optimal cash flow management.