Zurn Elkay Water Solutions Corporation (ZWS)

Zurn Elkay Water Solutions Corporation's liquidity ratios have shown fluctuating trends over the years.

1. Current Ratio:
- The current ratio, which measures the company's ability to pay off its short-term liabilities with its current assets, was 2.78 as of March 31, 2020.
- It decreased to 1.98 by December 31, 2021, indicating a potential weakening of the company's short-term liquidity position.
- However, there was a subsequent improvement in the current ratio to 2.62 by December 31, 2022, further strengthening to 3.02 by December 31, 2023, and then slightly decreasing to 2.91 by December 31, 2024.

2. Quick Ratio:
- The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, was 1.99 as of March 31, 2020.
- However, the quick ratio declined significantly to 1.14 by December 31, 2021, indicating potential challenges in meeting short-term obligations without relying on inventory.
- There was a gradual improvement in the quick ratio over the following years, reaching 1.69 by December 31, 2024.

3. Cash Ratio:
- The cash ratio, which focuses solely on the company's cash and cash equivalents relative to current liabilities, was 1.26 as of March 31, 2020.
- The cash ratio decreased notably to 0.40 by December 31, 2021, indicating a significant decrease in the proportion of cash available to cover short-term liabilities.
- There was a subsequent improvement in the cash ratio over the subsequent years, rising to 0.80 by December 31, 2024.

In summary, while Zurn Elkay Water Solutions Corporation experienced some fluctuations in its liquidity ratios, the company showed improvement in its liquidity position over the years, as indicated by the upward trends in the current ratio, quick ratio, and cash ratio.

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Additional liquidity measure

The cash conversion cycle for Zurn Elkay Water Solutions Corporation has shown fluctuations over the years, ranging from a low of 86.64 days on March 31, 2020, to a high of 179.47 days on December 31, 2022. This cycle represents the time it takes for the company to convert its investments in inventory into cash receipts from sales, taking into account both the days inventory outstanding and the days sales outstanding.

The increasing trend in the cash conversion cycle from 2020 to 2022 could indicate potential challenges in managing inventory and collecting receivables efficiently. A longer cash conversion cycle may tie up more of the company's funds in working capital, impacting its liquidity and ability to invest in growth opportunities.

The subsequent decrease in the cash conversion cycle from 2022 to 2024 suggests improvements in inventory management and/or faster collection of receivables. This reduction in the cycle can lead to enhanced cash flow and working capital efficiency for the company.

Overall, monitoring and managing the cash conversion cycle is crucial for Zurn Elkay Water Solutions Corporation to optimize its working capital and liquidity position, ensuring a healthy balance between operational efficiency and financial stability.