Acuity Brands Inc (AYI)

Acuity Brands Inc's liquidity ratios show varying trends over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has generally been stable, ranging from 2.00 to 2.72. This indicates that the company has a strong ability to cover its short-term liabilities with its current assets.

On the other hand, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has shown some fluctuations. The quick ratio was below 1 in 2021 and 2022 but improved in the following years. This suggests that Acuity Brands Inc may have had some challenges in meeting its short-term obligations without relying on inventory in those years, although the recent improvement is a positive sign.

The cash ratio, which is the most stringent liquidity measure as it only considers cash and cash equivalents to cover current liabilities, has also shown improvement over the years. Starting at 0.30 in 2022, the cash ratio increased to 0.67 in 2023 and continued to rise, reaching 0.91 in 2020. However, the negative value of -1.02 in 2024 indicates that the company's current cash and equivalents may not be sufficient to cover short-term liabilities.

In summary, Acuity Brands Inc's liquidity position appears relatively healthy based on the current and quick ratios, indicating a strong ability to meet short-term obligations with its current assets. The improving trend in the quick and cash ratios over the years also suggests a better ability to cover short-term liabilities without relying on inventory and with a higher proportion of cash and equivalents. It is important for the company to continue monitoring and managing its liquidity to ensure financial stability and resilience.

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Additional liquidity measure

The cash conversion cycle of Acuity Brands Inc has fluctuated over the past five years. In the most recent period ending on August 31, 2024, the company's cash conversion cycle was 57.44 days, indicating that it takes approximately 57 days for the company to convert its investments in inventory into cash flows from sales.

Compared to the previous year, there was a slight improvement in the cash conversion cycle from 60.33 days in August 2023. However, looking at a longer-term trend, the cash conversion cycle was higher in August 2022 and 2021 at 70.11 days and 61.63 days, respectively. August 2020 saw a lower cash conversion cycle of 53.68 days.

Generally, a shorter cash conversion cycle suggests that the company is more efficient in managing its working capital and converting its resources into cash. On the other hand, a longer cash conversion cycle may indicate inefficiencies in inventory management, sales collection processes, or payment terms with suppliers.

Therefore, Acuity Brands Inc should continue to monitor and manage its cash conversion cycle to ensure optimal utilization of resources and improve overall financial performance.