UFP Technologies Inc (UFPT)

UFP Technologies Inc's liquidity ratios have shown fluctuations over the past five years.

1. Current Ratio: The company's current ratio has decreased from 4.75 in 2020 to 2.56 in 2024. While the current ratio indicates the company's ability to meet short-term obligations with its current assets, a ratio above 1 suggests good liquidity. Although there has been a decline, the current ratio still remains above 1, indicating that the company can cover its short-term liabilities with its current assets.

2. Quick Ratio: UFP Technologies Inc's quick ratio has also seen a decline over the years, from 3.35 in 2020 to 1.29 in 2024. The quick ratio only considers the most liquid assets when assessing a company's ability to pay its short-term liabilities. Despite the downward trend, the quick ratio remains above 1, suggesting that the company still possesses sufficient liquid assets to cover its immediate obligations.

3. Cash Ratio: The cash ratio, which is the most conservative liquidity ratio, measures a company's ability to cover its current liabilities with its cash and cash equivalents. UFP Technologies Inc's cash ratio has fluctuated significantly, dropping from 1.60 in 2020 to 0.18 in 2024. The decreasing trend indicates a reduction in the company's ability to pay off its short-term liabilities only with cash and cash equivalents.

In general, based on these liquidity ratios, UFP Technologies Inc appears to have experienced a decrease in its liquidity position over the years. While the current and quick ratios suggest that the company can still meet its short-term obligations with its current assets, the declining cash ratio raises concerns about its ability to pay off immediate liabilities solely with cash reserves. Ongoing monitoring of these liquidity ratios will be essential to assess the company's ability to manage its short-term financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle of UFP Technologies Inc has exhibited fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle stood at 85.27 days, indicating the average number of days it takes for the company to convert its investments in inventory back into cash.

In the subsequent years, there was an upward trend in the cash conversion cycle, reaching 113.04 days by December 31, 2021. This increase suggests a lengthening of the company's operating cycle, potentially due to challenges in inventory management, slower collections from customers, or extended payment periods to suppliers.

By December 31, 2022, there was a slight improvement in the cash conversion cycle, reducing to 92.21 days. However, this improvement was short-lived as the cycle increased again to 109.67 days by December 31, 2023, indicating potential inefficiencies in managing working capital.

Towards the end of the period under review, by December 31, 2024, the cash conversion cycle decreased to 102.03 days. Despite this reduction, the cycle remains relatively high compared to the initial year, reflecting ongoing challenges in optimizing the company's operating efficiency and liquidity management.

Overall, the fluctuation in UFP Technologies Inc's cash conversion cycle over the five-year period highlights the importance of closely monitoring working capital components to enhance cash flow management and operational performance.