Sensient Technologies Corporation (SXT)

Sensient Technologies Corporation has demonstrated consistently strong liquidity ratios over the years. The current ratio, which indicates the company's ability to cover its short-term obligations with its current assets, has remained above 3 in recent years, indicating a healthy liquidity position. The slight decrease in the current ratio from 2021 to 2022 was followed by an increase in subsequent years, reaching a high of 3.96 in 2023 before settling at 3.55 in 2024.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Sensient Technologies Corporation's quick ratio has generally been above 1, suggesting that the company can meet its short-term liabilities without relying on selling its inventory. The slight fluctuation in the quick ratio over the years remained within a relatively narrow range, indicating stable liquidity management practices.

The cash ratio, which evaluates a company's ability to cover its short-term liabilities with its cash and cash equivalents, has shown a similar trend of stability and strength at Sensient Technologies Corporation. While there was a slight dip in the cash ratio in 2022, it rebounded in subsequent years to levels comparable to or higher than the initial ratio in 2020.

Overall, the liquidity ratios of Sensient Technologies Corporation reflect a robust financial position, with sufficient liquid assets to meet its short-term obligations comfortably. The company's consistent performance in maintaining strong liquidity ratios demonstrates effective liquidity management and financial stability.

---

Additional liquidity measure

The cash conversion cycle of Sensient Technologies Corporation has demonstrated a positive trend over the analyzed period. Starting at 413.91 days on December 31, 2020, it increased slightly to 417.03 days by December 31, 2021. However, a significant improvement was observed in the subsequent years, notably dropping to 201.45 days by December 31, 2022, and further decreasing to 199.95 days by December 31, 2023. The trend continued positively, reaching 191.05 days by December 31, 2024.

This progression indicates that Sensient Technologies Corporation has been managing its operating cycle more efficiently, leading to quicker conversion of resources into cash. A declining cash conversion cycle suggests that the company is collecting receivables faster, managing inventory levels effectively, and elongating the payment period to suppliers, all of which are favorable indicators of liquidity and operational efficiency.