The Cheesecake Factory (CAKE)

The liquidity ratios of The Cheesecake Factory, based on the provided data, show a concerning trend over the evaluated period.

The current ratio, which measures the company's ability to pay its short-term obligations with its current assets, has been consistently low, ranging from 0.46 to 0.53. A current ratio below 1 indicates that the company may have difficulty meeting its short-term financial obligations.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also paints a worrisome picture. The quick ratio has fluctuated between 0.09 and 0.17 over the period, indicating a limited ability to cover immediate liabilities without relying on inventory sales.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, shows a similar pattern of weakness. The cash ratio ranges from 0.09 to 0.17, suggesting that the company may struggle to cover its short-term obligations solely with cash on hand.

Overall, the liquidity ratios of The Cheesecake Factory indicate a potential liquidity risk, as the company may face challenges in meeting its short-term financial obligations using its current assets across the evaluated period. Further analysis and monitoring of the company's liquidity position are recommended to assess and address these concerns.

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Additional liquidity measure

The cash conversion cycle of The Cheesecake Factory has shown fluctuations over the periods analyzed. As of January 31, 2023, the company's cash conversion cycle was 10.02 days, indicating the average number of days it takes for the company to convert its investments in inventory and other resources back into cash flow from sales. By December 31, 2023, the cash conversion cycle decreased significantly to 0.94 days, suggesting improved efficiency in managing its working capital.

However, the cycle increased again to 10.36 days by January 31, 2024, possibly indicating challenges in inventory management or collection of receivables. This trend was reversed by December 31, 2024, with a notable decrease in the cycle to 2.31 days, signifying a potential enhancement in operational effectiveness.

On January 31, 2025, The Cheesecake Factory experienced a substantial increase in its cash conversion cycle to 29.22 days, which may be attributed to factors such as inventory build-up or delays in collection activities. Overall, variations in the cash conversion cycle reflect fluctuations in the company's working capital management and operational efficiency during the respective periods analyzed.