AutoZone Inc (AZO)
Liquidity ratios
| Aug 31, 2024 | Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.84 | 0.80 | 0.77 | 0.87 | 1.08 |
| Quick ratio | 0.10 | 0.10 | 0.10 | 0.22 | 0.35 |
| Cash ratio | 0.04 | 0.04 | 0.04 | 0.17 | 0.29 |
The liquidity ratios of AutoZone Inc over the past five years show a concerning trend.
The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has been declining steadily from 1.08 in 2020 to 0.84 in 2024. This indicates a reduction in the company's short-term liquidity and may suggest potential difficulties in meeting its current liabilities.
The quick ratio, also known as the acid-test ratio, reflects the immediate liquidity of a company by excluding inventory from current assets. AutoZone's quick ratio has remained constant at 0.10 for the past three years, indicating that the company may have difficulty meeting its short-term obligations without relying on inventory.
The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents. AutoZone's cash ratio has decreased from 0.29 in 2020 to 0.04 in 2024, implying that the company's ability to pay off its current obligations solely with cash has significantly diminished.
Overall, the declining trend in these liquidity ratios suggests that AutoZone Inc may be facing challenges in managing its short-term liquidity and meeting its current obligations. It is essential for the company to carefully monitor and improve its liquidity position to ensure financial stability and meet its financial commitments in the future.
See also:
Additional liquidity measure
| Aug 31, 2024 | Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -39.75 | -51.67 | -66.70 | -63.12 | -32.00 |
The cash conversion cycle of AutoZone Inc has exhibited fluctuations over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash receipts from sales. A negative cash conversion cycle indicates that the company is able to collect cash from customers before paying its suppliers, resulting in a favorable working capital position.
AutoZone Inc's cash conversion cycle has shown improvement over the years, decreasing from -32.00 days in 2020 to -39.75 days in 2024. This suggests that the company has efficiently managed its inventory, accounts receivable, and accounts payable over the period, allowing it to convert its resources into cash quickly. The trend indicates a more efficient use of working capital and a potentially improved liquidity position for the company.
Despite some fluctuations, the overall trend of decreasing days in the cash conversion cycle indicates that AutoZone Inc has been successful in managing its working capital effectively. This could be attributed to the company's inventory management practices, collection policies, and payment terms with suppliers. A shorter cash conversion cycle generally signifies better financial health and operational efficiency for the company.