Olympic Steel Inc (ZEUS)

The liquidity ratios of Olympic Steel Inc. provide insight into the company's ability to meet its short-term financial obligations.

1. Current Ratio:
- The current ratio measures the company's ability to pay off its current liabilities with its current assets.
- Olympic Steel's current ratio has shown some fluctuations over the past five years, ranging from 3.17 to 4.00.
- A higher current ratio indicates a stronger liquidity position, showing that the company has sufficient current assets to cover its current liabilities.
- Olympic Steel's current ratio has generally been above 3, indicating robust liquidity and ability to meet 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 inventories from current assets.
- Olympic Steel's quick ratio has ranged from 1.20 to 1.46 over the last five years.
- The quick ratio is lower than the current ratio, reflecting the impact of excluding inventories from the calculation.
- Generally, a quick ratio of 1 or higher is considered acceptable, and Olympic Steel's quick ratios meet this benchmark, indicating a good ability to cover short-term obligations.

3. Cash Ratio:
- The cash ratio is the most conservative measure of liquidity, focusing solely on the company's ability to cover its current liabilities with cash and cash equivalents.
- Olympic Steel's cash ratio has fluctuated between 0.08 and 0.14 over the past five years.
- A cash ratio below 1 indicates that the company does not have enough cash to cover its current liabilities.
- Olympic Steel's cash ratio is consistently below 1, suggesting that a significant portion of its current liabilities may need to be covered by sources other than cash.

In summary, Olympic Steel Inc. maintains strong liquidity positions based on its current ratio and quick ratio, but the lower cash ratio indicates a reliance on sources other than cash to meet short-term obligations. Monitoring and managing cash resources effectively could further enhance the company's liquidity position.

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Additional liquidity measure

The cash conversion cycle of Olympic Steel Inc. has fluctuated over the past five years. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

In 2023, the cash conversion cycle was 90.14 days, showing an improvement from the previous year's cycle of 86.86 days. This indicates that the company was able to manage its inventory, accounts receivable, and accounts payable more efficiently, resulting in a quicker conversion of resources into cash.

Comparing this to 2021, where the cash conversion cycle was 113.05 days, it is evident that Olympic Steel Inc. faced challenges in managing its working capital effectively. However, the company showed improvement in 2022 and continued the positive trend in 2023.

The cash conversion cycle in 2020 was 101.77 days, indicating a slight improvement from the previous year. In 2019, the cycle was 89.06 days, showing that the company was relatively efficient in converting its resources into cash flows.

Overall, Olympic Steel Inc. has demonstrated fluctuations in its cash conversion cycle over the past five years, with noticeable improvements in recent years. The company's ability to manage its working capital effectively is crucial in maintaining a healthy cash conversion cycle and optimizing cash flows.