Worthington Industries Inc (WOR)
Liquidity ratios
May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | |
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Current ratio | 3.78 | 2.60 | 1.92 | 2.50 | 2.53 |
Quick ratio | 1.37 | 0.63 | 0.04 | 1.11 | 0.38 |
Cash ratio | 1.37 | 0.63 | 0.04 | 1.11 | 0.38 |
Based on the provided data, Worthington Industries Inc's liquidity ratios demonstrate fluctuations over the years. The current ratio, which indicates the company's ability to cover short-term liabilities with its current assets, decreased from 2.53 in May 2020 to 1.92 in May 2022, but then improved to 3.78 in May 2024. This shows the company had a strong liquidity position in 2020, faced some challenges in 2022, and significantly improved its liquidity by 2024.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also displayed variability. It was 0.38 in May 2020, rose to 1.11 in May 2021, dropped sharply to 0.04 in May 2022, but then recovered to 1.37 in May 2024. This erratic trend suggests fluctuations in the company's ability to quickly cover its short-term obligations with its most liquid assets.
The cash ratio, an even more conservative measure of liquidity that focuses solely on cash and cash equivalents, followed a similar pattern to the quick ratio. It increased from 0.38 in May 2020 to 1.11 in May 2021, fell sharply to 0.04 in May 2022, and then rose to 1.37 in May 2024. This indicates that Worthington Industries Inc improved its capacity to pay off its immediate liabilities with cash in hand over the years, despite the short-term fluctuations.
Overall, the liquidity ratios of Worthington Industries Inc demonstrate some volatility, with periods of strength and weakness in its ability to meet short-term obligations. The company's liquidity position improved significantly by May 2024 compared to earlier years, suggesting a positive trend in managing its liquidity and financial resources. However, continued monitoring of these ratios will be crucial to assess the company's ongoing liquidity risk and financial stability.
Additional liquidity measure
May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
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Cash conversion cycle | days | 62.54 | 52.18 | 61.20 | 81.40 | 56.53 |
The cash conversion cycle of Worthington Industries Inc has exhibited fluctuations over the past five years. As of May 31, 2020, the company's cash conversion cycle stood at 56.53 days, showing an efficient management of cash flow and working capital. However, this metric increased significantly to 81.40 days by May 31, 2021, indicating a potential delay in converting inventory into cash and collecting receivables.
Subsequently, the cash conversion cycle improved to 61.20 days by May 31, 2022, suggesting a more effective utilization of resources in the production and sales processes. This was followed by a further decrease to 52.18 days by May 31, 2023, indicating enhanced efficiency in managing operating cash flows.
However, by May 31, 2024, the cash conversion cycle increased slightly to 62.54 days, signifying a potential increase in the time taken to convert inventory into sales and collect payments. Overall, the trend in Worthington Industries Inc's cash conversion cycle demonstrates fluctuations in the management of working capital and operational efficiency over the five-year period.