Academy Sports Outdoors Inc (ASO)

Academy Sports Outdoors Inc's liquidity ratios have shown improvement over the past four years, indicating a stronger ability to meet its short-term obligations. The current ratio has increased steadily from 1.21 in 2021 to 1.87 in 2024, suggesting the company has more than enough current assets to cover its current liabilities. The quick ratio, although fluctuating, has generally been low, with a slight increase from 0.34 in 2021 to 0.42 in 2024, indicating that the company may have some difficulty meeting its short-term obligations without relying on inventory.

The cash ratio, which measures the company's ability to pay off its current liabilities with its most liquid assets (cash and cash equivalents), has also shown improvement, rising from 0.32 in 2021 to 0.40 in 2024. This indicates that Academy Sports Outdoors Inc has increased its cash reserves relative to its short-term liabilities.

Overall, the increasing trend in the current and cash ratios, despite fluctuations in the quick ratio, suggests that Academy Sports Outdoors Inc has enhanced its liquidity position over the years, which could potentially provide more financial stability and flexibility for the company in the short term.

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Additional liquidity measure

The cash conversion cycle of Academy Sports Outdoors Inc has shown a consistent increasing trend over the past four years, indicating potentially worsening efficiency in managing its cash flow and working capital. In FY2021, the company had a relatively short cash conversion cycle of 14.89 days, suggesting efficient management of its inventory, receivables, and payables. However, this figure increased to 28.08 days in FY2022, signifying a lengthening cycle and possibly delays in receiving payments from customers or managing inventory levels effectively.

Moreover, in FY2023 and FY2024, the cash conversion cycle further extended to 40.19 days and 44.58 days, respectively. This continued increase suggests that Academy Sports Outdoors Inc is taking longer to convert its investments in inventory into cash, which could lead to potential liquidity issues or inefficiencies in its operations.

Overall, the deteriorating trend in the cash conversion cycle of Academy Sports Outdoors Inc reflects challenges in managing working capital efficiently and highlights the need for the company to focus on optimizing its cash flow processes to enhance operational performance and financial stability.