Steel Dynamics Inc (STLD)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 2.91 | 3.76 | 3.10 | 3.38 | 4.22 |
| Quick ratio | 1.60 | 2.12 | 1.42 | 1.86 | 2.47 |
| Cash ratio | 0.91 | 1.11 | 0.56 | 1.09 | 1.63 |
Steel Dynamics Inc.'s liquidity ratios show a declining trend over the past five years. The current ratio has decreased from 4.22 in 2019 to 2.91 in 2023, indicating a decreasing ability to meet short-term obligations with current assets. This may indicate potential liquidity concerns or a less efficient management of current assets.
Similarly, the quick ratio has also shown a downward trend, from 2.55 in 2019 to 1.67 in 2023. This suggests a decrease in the company's ability to cover immediate liabilities with its most liquid assets, such as cash and accounts receivable. A declining quick ratio could potentially signal a higher risk of not being able to meet short-term obligations quickly.
The cash ratio, which measures the company's ability to cover current liabilities with cash and cash equivalents, has also decreased from 1.71 in 2019 to 0.98 in 2023. This indicates a reduced capacity to cover immediate liabilities solely with cash on hand, which may raise concerns about the company's cash flow management and ability to handle unforeseen expenses.
Overall, the declining trend in Steel Dynamics Inc.'s liquidity ratios over the past five years suggests a potential weakening of the company's liquidity position. Investors and creditors may view this trend as a red flag, emphasizing the importance of monitoring the company's ability to meet short-term obligations in the future.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 100.09 | 81.71 | 101.35 | 85.35 | 77.63 |
The cash conversion cycle of Steel Dynamics Inc. has shown fluctuations over the past five years. For the fiscal year ending December 31, 2023, the cash conversion cycle decreased to 75.93 days from 81.48 days in the previous year, indicating an improvement in the efficiency of the company's working capital management.
Comparing to prior years, the cash conversion cycle was higher in 2022 at 81.48 days compared to 2021 at 100.96 days. This increase in 2022 was concerning as it suggested a delay in converting the company's investments in inventory and accounts receivable into cash.
However, it is worth noting that the cash conversion cycle in 2023 was lower than in 2020 (84.95 days) and 2019 (77.48 days), reflecting a positive trend towards a shorter cash conversion cycle.
Overall, a decreasing trend in the cash conversion cycle is favorable as it indicates that the company is managing its working capital more efficiently, accelerating cash flows, and potentially improving liquidity. Investors and stakeholders may view this improvement positively as it signals effective management of operational and financial processes.