Steel Dynamics Inc (STLD)

Cash ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cash and cash equivalents	US$ in thousands	1,400,890	1,628,420	1,243,870	1,368,620	1,381,460
Short-term investments	US$ in thousands	721,210	628,215	351	0	262,174
Total current liabilities	US$ in thousands	2,332,300	2,032,300	2,227,370	1,258,790	1,006,700
Cash ratio		0.91	1.11	0.56	1.09	1.63

December 31, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($1,400,890K + $721,210K) ÷ $2,332,300K
= 0.91

The cash ratio of Steel Dynamics Inc. has shown fluctuations over the past five years. The ratio stood at 0.98 as of December 31, 2023, indicating that for every $1 of current liabilities, the company had $0.98 in cash and cash equivalents to cover those obligations. This represents a decrease from the previous year's ratio of 1.21, suggesting a potential decrease in the company's ability to cover its short-term liabilities solely with cash reserves.

Comparing to the ratios from 2021 to 2019, the cash ratio has shown variability. In 2021, the ratio was 0.65, which was the lowest among the five years analyzed, indicating a weaker liquidity position. However, the ratio improved in 2022 and 2023 but still remained below the levels seen in 2020 (1.15) and 2019 (1.71), reflecting fluctuations in the company's cash position relative to its current liabilities over the years.

It is important to note that while a high cash ratio is generally perceived as a positive indicator of liquidity and the ability to meet short-term obligations, a very high ratio may also suggest that the company is holding excess cash that could potentially be utilized more effectively elsewhere in the business, such as for investments or operational activities. Conversely, a low cash ratio may indicate liquidity concerns and the need for the company to manage its cash resources more efficiently.

In conclusion, the fluctuating trend in Steel Dynamics Inc.'s cash ratio over the past five years highlights the importance of monitoring the company's liquidity position and managing its cash resources effectively to ensure its ability to meet short-term obligations.