For Immediate Release
Chicago, IL – April 21, 2021 – Stocks in this week’s article are L Brands, Inc. (
LB Quick Quote LB - Free Report) , Logitech International S.A. ( LOGI Quick Quote LOGI - Free Report) , Sonos, Inc. ( SONO Quick Quote SONO - Free Report) and Winnebago Industries, Inc. ( WGO Quick Quote WGO - Free Report) . 4 Thriving Liquid Stocks to Enrich Your Portfolio in 2021
Building a portfolio of stocks with favorable liquidity is the way to go for investors seeking healthy returns.
Liquidity is a measure of a company’s capability to meet its short-term debt obligations. Thus, companies boasting impressive liquidity positions may be considered to have solid financial health.
However, one should be careful about investing in a stock with high liquidity level as it may also indicate that the company is failing to utilize its assets efficiently.
Therefore, in addition to the liquidity level, an investor may also consider the efficiency of the company before pumping resources into the stock. An efficient company with a favorable liquidity level may prove to be a profitable addition to one’s portfolio.
Measures to Identify Liquid Stocks Current Ratio: It measures current assets relative to current liabilities. This ratio is used for measuring a company’s potential to meet both short- and long-term debt obligations. Thus, a current ratio — also known as working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always indicate that the company is in good financial shape. It may also mean that the company has failed to utilize its assets significantly. Hence, a range of 1 to 3 is considered ideal. Quick Ratio: Unlike current ratio, quick ratio — also called “acid-test ratio" or "quick assets ratio" — indicates a company’s ability to pay short-term obligations. It considers inventory excluding current assets relative to current liabilities. Like the current ratio, a quick ratio of greater than 1 is desirable. Cash Ratio: This is the most conservative ratio among the three, as it takes into account only cash and cash equivalents, and invested funds relative to current liabilities. It measures a company’s ability to meet its current debt obligations using the most liquid of assets. Though a cash ratio of more than 1 may point to sound financials, a higher number may indicate inefficiency in cash utilization.
So, a ratio greater than 1 is desirable at all times but may not always appropriately represent a company’s financial condition.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1425140/4-thriving-liquid-stocks-to-enrich-your-portfolio-in-2021 Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. About Screen of the Week
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