Aramark Holdings (ARMK)

Over the past five years, Aramark Holdings' liquidity ratios have fluctuated, indicating changes in the company's ability to meet its short-term financial obligations.

1. Current Ratio: This ratio measures the company's ability to cover its short-term liabilities with its current assets. Aramark's current ratio has experienced fluctuations, ranging from a low of 0.81 to a high of 2.15. A ratio below 1 suggests potential liquidity issues, while a ratio above 1 indicates a healthy liquidity position. Aramark's current ratio has generally been above 1, although there have been periods where it dipped below this threshold, particularly in the recent quarters.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Aramark's quick ratio has also displayed volatility, ranging from 0.67 to 1.81. Similar to the current ratio, a quick ratio below 1 indicates potential difficulties in meeting short-term obligations. Aramark's quick ratio has generally stayed above 1, demonstrating a reasonable ability to cover immediate liabilities with its most liquid assets.

3. Cash Ratio: The cash ratio is the most conservative liquidity measure as it reflects a company's ability to cover its current liabilities with cash and cash equivalents only. Aramark's cash ratio has varied widely, from 0.10 to 1.14. A higher cash ratio indicates a stronger ability to settle short-term obligations using cash on hand. Despite the fluctuations, Aramark has maintained its cash ratio above 1 in several periods, indicating a robust cash position relative to its short-term liabilities.

In summary, while Aramark Holdings' liquidity ratios have shown volatility over the past five years, the company generally maintains a satisfactory liquidity position. However, there have been instances where the ratios fell below ideal thresholds, signaling potential liquidity challenges that may warrant monitoring and management attention.

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Additional liquidity measure

The cash conversion cycle of Aramark Holdings has fluctuated over the past few quarters. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash received from customers.

In the most recent quarter, ending September 30, 2024, the cash conversion cycle was 22.54 days. This represents an improvement from the previous quarter's cycle of 30.39 days. The reduction in the cycle implies that Aramark Holdings was able to manage its cash more efficiently by either speeding up the collection of receivables, managing inventory levels more effectively, or delaying payment to suppliers.

Looking back further, the trend in the cash conversion cycle has been somewhat volatile, ranging from a low of 18.62 days in September 2023 to a high of 44.24 days in March 2021. The fluctuations indicate potential challenges in managing working capital effectively across different periods.

Overall, Aramark Holdings has shown a degree of variability in its cash conversion cycle, which could indicate fluctuations in its operating efficiency and working capital management. Monitoring this metric going forward will be important in assessing the company's ability to efficiently utilize its resources to generate cash flow.