Acuity Brands Inc (AYI)
Cash ratio
| Aug 31, 2024 | Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash and cash equivalents | US$ in thousands | 845,800 | 397,900 | 223,200 | 491,300 | 560,700 |
| Short-term investments | US$ in thousands | -1,548,200 | — | — | — | — |
| Total current liabilities | US$ in thousands | 687,900 | 595,400 | 733,600 | 692,200 | 617,600 |
| Cash ratio | -1.02 | 0.67 | 0.30 | 0.71 | 0.91 |
August 31, 2024 calculation
Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($845,800K
+ $-1,548,200K)
÷ $687,900K
= -1.02
The cash ratio measures a company's ability to cover its short-term liabilities with its most liquid assets, cash and cash equivalents. A cash ratio below 1 indicates that a company may not have enough cash on hand to meet its short-term obligations.
Looking at Acuity Brands Inc's cash ratio over the past five years, we observe a fluctuating trend. In 2020, the cash ratio was at a healthy level of 0.91, indicating the company had sufficient cash to cover its short-term liabilities. However, there was a significant decrease in 2021 to 0.71, suggesting a potential decrease in liquidity.
The cash ratio further deteriorated in 2022 to 0.30, indicating a higher risk of liquidity constraints. This might suggest that Acuity Brands Inc faced challenges in managing its short-term cash flow in that period. The situation worsened in 2023 with a cash ratio of 0.67, still below the ideal threshold of 1.
Interestingly, the latest data for 2024 shows a negative cash ratio of -1.02. This indicates that Acuity Brands Inc's current cash and cash equivalents are insufficient to cover its short-term liabilities, which could raise concerns about the company's ability to meet its immediate financial obligations.
In conclusion, the decreasing trend in Acuity Brands Inc's cash ratio over the years raises red flags regarding the company's liquidity position. It is crucial for the company to closely monitor its cash management and work towards improving its cash reserves to ensure financial stability and meet its short-term obligations effectively.
Peer comparison
Aug 31, 2024