Bath & Body Works Inc. (BBWI)

The liquidity ratios of Bath & Body Works Inc. indicate the company's ability to meet its short-term obligations and operating needs.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- Bath & Body Works Inc.'s current ratio has been relatively stable over the past five years, ranging from 1.37 to 2.33.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, suggesting a healthy liquidity position.
- The current ratio of 1.64 in 2024 implies that Bath & Body Works Inc. had $1.64 in current assets for every $1 in current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets.
- Bath & Body Works Inc.'s quick ratio has also remained fairly consistent over the years, ranging from 0.76 to 1.72.
- A quick ratio above 1 indicates that the company can cover its short-term obligations without relying on the sale of inventory.
- The 2024 quick ratio of 1.01 suggests that Bath & Body Works Inc. had $1.01 in liquid assets for every $1 of current liabilities.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, focusing solely on the company's ability to cover its current liabilities with cash and cash equivalents.
- Bath & Body Works Inc.'s cash ratio has fluctuated but generally increased over the past five years, ranging from 0.63 to 1.53.
- A cash ratio above 1 suggests that the company can meet its short-term obligations solely with cash on hand.
- The 2024 cash ratio of 0.84 indicates that Bath & Body Works Inc. had $0.84 in cash and equivalents for every $1 of current liabilities.

In summary, Bath & Body Works Inc. has maintained stable liquidity ratios over the years, with current, quick, and cash ratios reflecting a generally healthy liquidity position. The company seems to have adequate resources to cover its short-term obligations and operational needs.

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Additional liquidity measure

The cash conversion cycle of Bath & Body Works Inc. has shown variability over the past five years. In the most recent fiscal year, the cash conversion cycle was 31.07 days, indicating that it took the company an average of 31.07 days to convert its investments in inventory and other resources into cash flows from sales. This represents an increase compared to the previous fiscal year, where the cycle was 26.43 days.

Furthermore, compared to two years ago, the cash conversion cycle has increased significantly from 16.52 days to 31.07 days. This suggests that Bath & Body Works Inc. may be facing challenges in managing its working capital efficiently.

Overall, the increasing trend in the cash conversion cycle signals potential inefficiencies in the company's operations related to inventory management, accounts receivable, and accounts payable. It is essential for Bath & Body Works Inc. to closely monitor and optimize its cash conversion cycle to enhance liquidity and operational performance.