Aramark Holdings (ARMK)

Aramark Holdings' liquidity ratios, including the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.

The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Aramark's current ratio has fluctuated over the years, with the latest ratio standing at 1.04 as of September 30, 2023. This indicates that the company may have sufficient current assets to cover its current liabilities, although the ratio has been trending closer to 1 in recent years, which may indicate a tighter liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Aramark's quick ratio has remained relatively stable over the years, with the latest ratio at 0.78 as of September 30, 2023. This suggests that the company may have a lower ability to cover its short-term obligations without relying on inventory, which could be a potential concern for liquidity.

The cash ratio specifically focuses on the company's ability to cover its current liabilities with its cash and cash equivalents. Aramark's cash ratio has also varied significantly over the years, with the latest ratio at 0.39 as of September 30, 2023. This indicates that the company may have a lower level of cash reserves relative to its current liabilities, which could potentially impact its ability to meet immediate obligations.

Overall, based on the liquidity ratios analyzed, Aramark Holdings may have a somewhat constrained liquidity position, with decreasing current ratios and relatively low quick and cash ratios. It is important for stakeholders to closely monitor these ratios to ensure the company's ability to manage its short-term financial obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Aramark Holdings has displayed fluctuating trends over the past five years. In Sep 2023, the company's cash conversion cycle reduced significantly to 19.92 days from 30.81 days in the previous year, indicating an improvement in the efficiency of managing its working capital. This reduction suggests that Aramark has been able to convert its investments in inventory and accounts receivable into cash more rapidly.

Comparing the current cycle to the data from Sep 30, 2021, and Sep 30, 2020, there was a noticeable decrease from 38.02 days to 19.92 days. This indicates that Aramark has been able to optimize its cash conversion processes, potentially by streamlining inventory management and collections from customers.

However, when compared to the results from Sep 2019, there has been an overall increase in efficiency since the cycle decreased from 27.16 days to 19.92 days, reflecting positively on the company's operational effectiveness in managing its cash flows in recent years.

Overall, Aramark Holdings has demonstrated an improved cash conversion cycle as of Sep 30, 2023, which suggests better working capital management and more efficient operations. Continued monitoring and analysis of this metric will be essential to ensure sustained efficiency in cash conversion processes.