Valmont Industries Inc (VMI)

The liquidity ratios of Valmont Industries Inc, namely the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet short-term obligations and manage its current liabilities efficiently.

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Valmont Industries Inc's current ratio has fluctuated over the past five years, ranging from a high of 2.79 in 2019 to a low of 2.21 in 2022. In 2023, the current ratio improved to 2.47, indicating that the company had $2.47 in current assets for every dollar of current liabilities. A current ratio above 1 suggests that the company is in a strong position to meet its short-term obligations.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Valmont Industries Inc's quick ratio has also varied over the years, with a low of 0.98 in 2021 and a high of 1.62 in 2019. In 2023, the quick ratio improved to 1.23, indicating that the company had $1.23 in liquid assets (excluding inventory) for every dollar of current liabilities. A quick ratio above 1 indicates that the company can cover its short-term obligations without relying on the sale of inventory.

3. Cash Ratio:
The cash ratio measures the company's ability to cover its current liabilities with cash and cash equivalents alone. Valmont Industries Inc's cash ratio has shown significant fluctuations, ranging from 0.23 in 2021 to 0.69 in 2019. In 2023, the cash ratio decreased to 0.32, indicating that the company had $0.32 in cash and cash equivalents for every dollar of current liabilities. A higher cash ratio is generally preferred as it signifies a greater ability to meet short-term obligations without relying on the sale of other assets.

Overall, while Valmont Industries Inc's liquidity ratios have shown variability over the years, the company generally maintains a healthy liquidity position with current and quick ratios consistently above 1, suggesting a strong ability to meet its short-term obligations. The fluctuation in the cash ratio may indicate changes in the company's cash management practices or investment in other liquid assets.

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Additional liquidity measure

The cash conversion cycle of Valmont Industries Inc has shown a fluctuating trend over the past five years. In 2023, the company's cash conversion cycle decreased to 85.46 days from 92.53 days in 2022, indicating that the company was able to efficiently convert its resources into cash during the year.

Comparing 2023 to 2021 and 2019, where the cash conversion cycle was 102.69 days and 95.51 days respectively, there has been an improvement in the management of working capital as the cycle has reduced. This indicates that the company was able to streamline its operations and manage its inventory, receivables, and payables effectively to generate cash more efficiently.

However, in 2020, the cash conversion cycle was slightly lower at 89.92 days compared to 2023. This suggests that there may have been some challenges in the company's working capital management during that year, resulting in a slightly longer cash conversion cycle.

Overall, the decreasing trend in the cash conversion cycle over the years reflects the company's efforts to improve its operational efficiency and liquidity position by optimizing its working capital management. This can be a positive indicator of the company's ability to generate cash and meet its short-term obligations effectively.