Worthington Steel Inc (WS)

Worthington Steel Inc's liquidity ratios indicate the ability of the company to meet its short-term obligations. The current ratio has shown a declining trend over the past four years, from 1.86 in 2021 to 1.62 in 2024. While the current ratio of 1.62 in 2024 still indicates that the company has sufficient current assets to cover its current liabilities, the decreasing trend may raise concerns about the company's ability to meet its short-term obligations in the future.

The quick ratio, which excludes inventory from current assets, is considerably lower than the current ratio for all years, indicating that a substantial portion of the company's current assets consists of inventory. The quick ratio has shown significant fluctuations, from 0.03 in 2021 and 2022 to 0.07 in 2023, and then dropping back to 0.84 in 2024. The quick ratio of 0.84 in 2024 indicates an improvement in the company's ability to meet its short-term obligations without relying on inventory.

The cash ratio, which is the most conservative measure of liquidity, has remained consistently low at 0.03 for the past three years, except for 2024 where it slightly increased to 0.07. This indicates that Worthington Steel Inc has a limited amount of cash relative to its current liabilities, which may raise concerns about the company's ability to handle unexpected short-term financial needs.

In summary, while Worthington Steel Inc's current ratio suggests that the company can meet its short-term obligations with its current assets, the declining trend raises some liquidity concerns. The quick ratio has shown fluctuations but improved in 2024, indicating a better ability to meet obligations without relying on inventory. However, the consistently low cash ratio suggests a limited cash position, which may impact the company's ability to handle unexpected liquidity needs.

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Additional liquidity measure

The cash conversion cycle of Worthington Steel Inc has fluctuated over the past four years. In August 2021, the company had a significantly longer cash conversion cycle of 92.04 days, indicating a slower conversion of investment in inventory and receivables into cash. However, by August 2022, Worthington Steel Inc managed to reduce their cash conversion cycle to 56.59 days, reflecting an improvement in efficiency in managing working capital.

In the most recent data available as of May 31, 2024, the company further improved its cash conversion cycle to 53.77 days, showcasing a continued focus on optimizing cash flow management. This reduction suggests that Worthington Steel Inc has been successful in enhancing their inventory management and collection processes, leading to quicker conversion of resources into cash.

Overall, the trend of decreasing cash conversion cycle over the years indicates that Worthington Steel Inc has been effective in streamlining their operations and managing their working capital more efficiently. This improvement is a positive indicator of the company's ability to generate cash and maintain a healthy financial position.