Cars.com Inc (CARS)

The liquidity ratios of Cars.com indicate its ability to meet short-term obligations and cover immediate financial needs.

The current ratio measures the company's ability to pay off its current liabilities with its current assets. The trend shows a decline from 2019 to 2021, suggesting a decrease in the company's ability to cover short-term obligations with its current assets. However, the current ratio improved in 2022 and 2023, indicating a better capacity to meet short-term liabilities in recent years.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. The consistency of the quick ratio over the years suggests that the company can meet its short-term obligations even when inventory is excluded.

The cash ratio indicates the company's ability to cover current liabilities with its cash and cash equivalents alone. The decline in the cash ratio from 2019 to 2020 and the subsequent improvement in 2021, 2022, and 2023, suggests fluctuations in the company's cash position over the years.

Overall, the analysis of Cars.com's liquidity ratios indicates varying levels of liquidity and short-term solvency over the past five years, with improvements in recent years in terms of current and cash ratios. It is essential for the company to continue monitoring these ratios to ensure they remain at healthy levels to meet ongoing obligations and maintain financial stability.

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Additional liquidity measure

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Negative values indicate that the company is able to collect cash from customers before having to pay suppliers, which is a favorable position.

Analyzing the trend of Cars.com's cash conversion cycle over the past five years, we observe the following:
- In 2023, the company's cash conversion cycle is negative, indicating efficient cash management where collections from customers exceed payments to suppliers.
- In 2022, the cycle increased to 2.37 days, suggesting a slightly longer time taken to convert investments into cash.
- In 2021, the cycle further increased to 8.59 days, potentially indicating issues with working capital management or operational inefficiencies.
- The cycle decreased to 3.08 days in 2020, showing improvements in converting investments back into cash.
- In 2019, the cycle was at its highest at 15.64 days, which may indicate challenges in cash flow management.

Overall, the varying trend in Cars.com's cash conversion cycle implies fluctuations in the efficiency of their working capital management over the years, with negative values reflecting stronger cash flow positions and positive values indicating room for improvement.