For immediate release
Chicago, IL – March 2, 2021 – Stocks in this week’s article are Ultra Clean Holdings, Inc. UCTT, iRobot Corporation IRBT, Skyline Champion Corporation SKY, Sturm, Ruger & Company, Inc. RGR and Magnolia Oil & Gas Corporation MGY.
5 Highest-Ranking Liquid Stocks to Boost Your Wealth in 2021
The liquidity of a stock is an important parameter that many investors tend to ignore. It primarily determines a company’s ability to service its debts by converting assets into cash and cash equivalents.
These stocks have always been sought after because of their potential for maximum return. However, one should be observant before investing in such stocks. Although a high level of liquidity may imply that the company pays its dues at a faster rate compared to its peers, it may also indicate that the company is not using its assets efficiently.
Therefore, one can consider a company’s level of efficiency in addition to its liquidity to identify potential winners.
Measures to identify liquid inventory
Current Ratio: It measures current assets against current liabilities. This ratio is used to measure a company’s potential to meet its short and long term debts. Thus, a current ratio – also called working capital ratio – below 1 indicates that the company has more liabilities than assets. However, a high cash ratio does not always indicate that the company is in good financial health. It can also mean that the company has not used its assets significantly. Therefore, a range of 1 to 3 is considered ideal.
Quick report: Unlike the current ratio, the quick ratio – also called the “acid-test ratio” or the “quick asset ratio” – indicates a company’s ability to pay its short-term obligations. It considers inventories excluding current assets in relation to current liabilities. Like the current gear, a fast gear greater than 1 is desirable.
Cash ratio: This is the most conservative ratio of the three, as it considers only cash and cash equivalents, and invested funds versus current liabilities. It measures a company’s ability to honor its current debts using the most liquid assets. Although a cash ratio above 1 can indicate healthy finances, a higher number can indicate inefficiency in the use of cash.
Thus, a ratio greater than 1 is desirable at all times, but may not always adequately represent a company’s financial condition.
For the rest of this article on Screen of the Week, please visit Zacks.com at: https://www.zacks.com/stock/news/1271068/5-top-ranked-liquid-stocks-to-boost-your-fortunes-in-2021
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