American Woodmark Corporation (AMWD)

The liquidity ratios of American Woodmark Corporation over the analyzed period reflect a generally stable financial position with some fluctuations that merit detailed observation.

Current Ratio:
The current ratio, measuring the company's ability to meet short-term obligations with its current assets, exhibited a declining trend from 2.18 as of July 31, 2020, to a low of approximately 1.78 by April 30, 2021. Subsequently, the ratio displayed a gradual recovery, reaching 2.26 on October 31, 2022, and peaking at 2.45 on January 31, 2023. Thereafter, minor fluctuations occurred, with ratios oscillating around 2.0 to 2.25 through October 2024, indicating that the company maintained a healthy liquidity position with more than twice its current liabilities at most points. The current ratio remained well above the common benchmark of 1.5, suggesting consistent capability to cover short-term liabilities.

Quick Ratio:
The quick ratio, which excludes inventory from current assets to assess more immediate liquidity, started at 1.41 in July 2020 and experienced a decline through April 2021 to approximately 0.80. During this period, the quick ratio dropped below 1.0, indicating a potential tightening of immediate liquidity. However, from October 2021 onward, a gradual improvement occurred, with the ratio surpassing 1.0 again by October 2022 and continuing upward to around 1.20 by October 2023 and April 2024. Despite some slight fluctuations, the quick ratio generally stayed above 0.8, implying that the company maintained sufficient liquid assets—excluding inventories—to meet short-term liabilities without relying on inventory liquidation.

Cash Ratio:
The most conservative liquidity measure, the cash ratio, revealed significant variability. Starting at 0.72 in July 2020, it declined sharply over the subsequent year, reaching 0.14 by July 2021 and effectively falling below 0.10 by January 2022. During this period, the company’s immediate cash funds available to settle short-term liabilities appeared limited. The ratio experienced some recovery after October 2022, reaching over 0.50 in October 2023 and April 2024, but remained relatively low compared to the other ratios. This indicates that while cash holdings increased temporarily, the company largely relied on other current assets to support liquidity.

Overall Observations:
Throughout the analyzed timeframe, American Woodmark Corporation demonstrated overall liquidity strength, with current and quick ratios mostly exceeding industry norms and suggesting adequate buffers to meet short-term obligations. The fluctuations, particularly in the cash ratio, signal periods of tighter cash holdings, though these were generally offset by stable current and quick ratios. The consistent maintenance of a current ratio above 1.9 in recent periods underscores a prudent liquidity management strategy, with the company able to sustain its operational financing needs effectively within the observed period.

---

Additional liquidity measure

The analysis of American Woodmark Corporation's cash conversion cycle (CCC) over the provided period reveals fluctuations indicative of varying operational efficiencies and working capital management strategies.

Initially, from July 31, 2020, to October 31, 2020, the CCC increased marginally from approximately 45.86 days to 47.00 days, maintaining a relatively stable range. A continued upward trend was observed through early 2021, reaching approximately 58.38 days by January 31, 2022, suggesting a period where the company experienced longer cycles in converting inventory into cash—potentially due to extended inventory holding periods or delays in receivables collection.

Throughout 2021 and into 2022, the CCC continued to rise, peaking at approximately 61.87 days on October 31, 2022. This escalation indicates a longer operational cycle, possibly caused by increased inventory levels, extended receivables, or supply chain disruptions affecting cash flow timings.

Subsequent quarters show a declining trend beginning in early 2023, with the CCC decreasing to approximately 44.83 days by July 31, 2023. This reduction suggests improvements in inventory turnover, receivables collection, or both, reflecting enhanced working capital management and operational efficiency.

However, the cycle fluctuates again in late 2023 and early 2024, with the CCC rising slightly before declining again in April 2024 to approximately 49.60 days and further to about 51.89 days on July 31, 2024. The most notable change occurs between July 31, 2024, and April 30, 2025, where the cycle sharply decreases to approximately 33.21 days, indicating a significant improvement, likely driven by more efficient inventory management, faster receivables collection, or both.

As of October 31, 2025, the CCC increases again to approximately 54.20 days, before a further decline to around 58.23 days in January 2025, and a subsequent sharp decrease to 33.21 days in April 2025. This dramatic reduction suggests a substantial optimization of cash conversion processes during this period.

In summary, over the observed timeframe, American Woodmark Corporation experienced periods of rising CCC, reflecting extended operational cycles, followed by periods of significant reduction, indicating improvements in working capital management. The recent trend towards a shorter cash conversion cycle points to enhanced operational efficiencies and more effective management of receivables, inventory, and payables, resulting in quicker cash conversion from its operating cycle.