Steel Dynamics Inc. (NASDAQ:STLD)

Current Ratio

The current ratio exhibited a generally declining trend over the five-year period. Starting at 4.04 in 2017, it slightly decreased to 3.96 in 2018, then increased to 4.22 in 2019 before declining more significantly to 3.38 in 2020 and further to 3.10 in 2021. This suggests a reduction in short-term liquidity, indicating that the company's ability to cover its current liabilities with current assets weakened over time.

Quick Ratio

The quick ratio followed a similar downward trajectory. After a moderate decline from 2.18 in 2017 to 2.06 in 2018, the ratio improved to 2.47 in 2019, then sharply deteriorated to 1.86 in 2020 and further to 1.42 in 2021. This pattern reflects a decrease in highly liquid assets relative to current liabilities, potentially signaling tighter liquidity conditions excluding inventory.

Cash Ratio

The cash ratio showed the most notable decline among the liquidity measures. The ratio dropped from 1.18 in 2017 to 1.04 in 2018, increased to a peak of 1.63 in 2019, then fell sharply to 1.09 in 2020, concluding with a significant decrease to 0.56 in 2021. Such a trend indicates a marked reduction in the company's cash and cash equivalents in relation to its current liabilities, pointing towards a potential need to monitor cash management and liquidity risk more closely.

Current Assets

There is a consistent upward trend in current assets from 2017 through 2021. Starting at approximately $3.51 billion in 2017, current assets increased steadily to about $4.03 billion in 2018 and $4.25 billion in 2019. The growth plateaued slightly in 2020 with a marginal increase to around $4.26 billion, followed by a significant surge to approximately $6.90 billion in 2021, indicating enhanced liquidity or increased short-term resources in that year.

Current Liabilities

Current liabilities also demonstrate an increasing pattern over the same period. Beginning near $869 million in 2017, liabilities rose steadily each year, reaching roughly $1.02 billion in 2018, just over $1 billion in 2019, then experiencing a more marked increase to about $1.26 billion in 2020. The most notable escalation occurred in 2021, doubling to approximately $2.23 billion. This rise suggests growing short-term obligations that might warrant close monitoring.

Current Ratio

The current ratio shows a declining trend, signaling a decrease in short-term liquidity relative to obligations despite the growth in current assets. Starting at a robust 4.04 in 2017, it slightly decreased to 3.96 in 2018, then increased to 4.22 in 2019, possibly due to a favorable balance between assets and liabilities that year. However, the ratio dropped significantly to 3.38 in 2020 and further to 3.1 in 2021. Although still above the commonly accepted threshold of 1, this downward trend points to a reduction in the margin of safety for covering short-term liabilities.

Total Quick Assets

Total quick assets exhibited an overall upward trend from 2017 to 2021. Starting at approximately 1.90 billion US dollars in 2017, the amount increased steadily to nearly 2.49 billion in 2019. Although there was a slight decline in 2020 to about 2.34 billion, the figure rebounded significantly in 2021 to exceed 3.16 billion, marking the highest value in the period considered.

Current Liabilities

Current liabilities showed a consistent increase throughout the five-year period. From around 869 million US dollars in 2017, the liabilities rose gradually reaching nearly 1.01 billion in 2018 and remaining relatively stable in 2019. However, a more pronounced increase occurred in 2020, followed by a substantial jump in 2021, where current liabilities reached approximately 2.23 billion, more than doubling the initial value.

Quick Ratio

The quick ratio, indicating the company's ability to meet short-term obligations with liquid assets, demonstrated a declining trend over the years. Starting at 2.18 in 2017, it decreased slightly to 2.06 in 2018, then increased to 2.47 in 2019, representing the peak in liquidity ratio during the period. After 2019, the ratio declined sharply to 1.86 in 2020 and further decreased to 1.42 in 2021, indicating a reduction in liquidity coverage relative to current liabilities despite the increase in total quick assets.

Overall Analysis

While total quick assets consistently increased over the period, the faster rise in current liabilities, particularly in 2021, has exerted downward pressure on the quick ratio. The decline in the quick ratio since 2019 suggests that the company’s liquidity position has weakened, despite the nominal growth in liquid assets. The significant increase in current liabilities by 2021 raises potential concerns about short-term financial obligations and the company's ability to cover them promptly using its quickest assets.

The financial data reveals several notable trends over the five-year period from 2017 to 2021.

Total cash assets

Total cash assets showed an initial increase from 1,028,649 thousand US dollars in 2017 to a peak of 1,643,634 thousand US dollars in 2019. This was followed by a decline to 1,368,618 thousand US dollars in 2020, and a further decrease to 1,243,868 thousand US dollars in 2021.

Current liabilities

Current liabilities generally increased throughout the period, starting at 868,519 thousand US dollars in 2017 and rising steadily to 1,019,137 thousand US dollars in 2018 and 1,006,698 thousand US dollars in 2019. The upward trend accelerated in 2020, reaching 1,258,787 thousand US dollars, and sharply increased in 2021 to 2,227,369 thousand US dollars.

Cash ratio

The cash ratio, which measures liquidity, exhibited fluctuation over the years. It started at 1.18 in 2017, slightly decreasing to 1.04 in 2018. It then rose significantly to 1.63 in 2019, indicating strong liquidity that year. However, the cash ratio declined to 1.09 in 2020 and dropped substantially to 0.56 in 2021, suggesting a comparatively weaker liquidity position at the end of the period.

Overall, while total cash assets experienced growth and then a decline, current liabilities consistently increased, culminating in a significant rise in 2021. The cash ratio trends imply that liquidity was adequate or strong in most years except for a notable decrease in 2021, potentially signaling increased short-term financial pressure or a shift in cash management strategy during that year.