Worthington Industries Inc (WOR)

The liquidity ratios of Worthington Industries Inc. demonstrate notable fluctuations over the analyzed period, reflecting the company's evolving short-term financial health.

The current ratio, which measures the company's ability to meet its short-term obligations with total current assets, shows a decreasing trend from 3.26 at August 31, 2020, to a low of approximately 1.85 at February 28, 2022. Following this nadir, it exhibits a gradual recovery, reaching as high as 3.78 by May 31, 2024, before experiencing a slight decline to 1.88 in November 2023 and a rebound to over 3.50 toward May 2025. Overall, the current ratio remains above the generally acceptable benchmark of 1.5, suggesting that the company maintains sufficient liquidity to cover its short-term liabilities, although the variability indicates periods of tighter liquidity management.

The quick ratio, which excludes inventories from current assets to focus on more liquid assets, reveals a sharper decline from 2.51 in August 2020 to 0.88 in February 2022, indicating a period where liquid assets excluding inventory were less than current liabilities. Subsequently, the quick ratio exhibits improvement, surpassing 2.0 by February 2024, and stabilizing around 1.27 to 2.38 through the most recent periods. This trend suggests that the company's more liquid assets have become more aligned with its short-term obligations, though at times, the quick ratio fell below 2.0, signaling potential periods of reduced liquidity.

The cash ratio, reflecting the most conservative measure of liquidity by comparing cash and cash equivalents to current liabilities, shows significant variability. It declined sharply from 1.73 at August 2020 to as low as 0.04 by February 2022, indicating a period where cash holdings were insufficient to cover immediate liabilities. However, from mid-2022 onward, the cash ratio increased steadily, reaching over 1.0 in early 2024 and maintaining levels above 1.24 in recent periods. These changes highlight an improvement in the company's cash position relative to its short-term liabilities, suggesting enhanced liquidity management or strategic cash accumulation in latter periods.

In summary, Worthington Industries Inc.'s liquidity ratios depict a company that experienced periods of tightening liquidity in the early to mid-2020s but has generally remained capable of meeting its short-term obligations. While the current ratio remains comfortably above critical thresholds, the quick and cash ratios indicate periods of liquidity stress, followed by notable recovery, implying active management strategies to bolster short-term financial strength.

---

Additional liquidity measure

The analysis of Worthington Industries Inc.'s cash conversion cycle (CCC) over the reported periods reveals notable fluctuations in operational efficiency related to working capital management. Initially, the CCC was relatively moderate, with a value of approximately 57.18 days as of August 31, 2020. Following this, a gradual decrease to around 52.64 days by November 30, 2020, indicated an improvement in the company's ability to convert inventories and receivables into cash more swiftly relative to its payables.

However, subsequent periods exhibited an upward trend, reaching a peak of approximately 91.50 days by November 30, 2021. This increase suggests a lengthening in the time it takes for the company to turn inventories and receivables into cash, possibly due to longer inventory holding periods or extended receivable collections, coupled with slower payables turnover.

From late 2021 onward, a general downward trend emerges, with the CCC decreasing to around 68.45 days by May 31, 2022, and further reducing to approximately 66.36 days by August 31, 2022. This decline points to improved working capital efficiency, enabling faster cash conversion. The CCC continued to decline in early 2023, reaching approximately 70.37 days in February, and then slightly decreasing to 69.03 days by May 2023.

However, the cycle experienced variability thereafter. Notably, it increased again to around 80.88 days by August 2023 and then slightly decreased to 75.89 days by November 2023. The trend reverses sharply in early 2024, with the CCC dropping to approximately 31.75 days in February, indicating a significant improvement in efficiency. This was followed by a temporary rise to 39.64 days in May and an increase to 55.14 days in August.

The most pronounced shift appears towards the end of the observed period, with the CCC escalating dramatically to over 100 days in late 2024 and early 2025, specifically reaching 100.65 days in November 2024, 100.18 days in February 2025, and finally reducing to 28.94 days in May 2025. This significant volatility suggests periods of either operational restructuring, changes in credit and inventory policies, or fluctuations in the receivables and payables cycles.

Overall, the company's cash conversion cycle demonstrates periods of both efficiency improvements and delays. The fluctuations highlight the importance of working capital management strategies and may reflect broader operational or market dynamics affecting inventory turnover, receivables collection, and payables policies over time.