CAVA Group, Inc. (CAVA)

Liquidity ratios

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current ratio 2.97 3.25 0.69 2.98 3.84
Quick ratio 2.86 3.16 0.56 2.83 3.64
Cash ratio 2.76 3.05 0.46 2.71 3.64

CAVA Group, Inc.'s liquidity ratios over the period from December 31, 2020, to December 31, 2024, reveal notable fluctuations and trends. The current ratio, which assesses the company's ability to meet short-term liabilities with its current assets, peaked at 3.84 in 2020 and gradually declined to a low of 0.69 in 2022 before rebounding to 3.25 in 2023 and slightly decreasing to 2.97 in 2024. The sharp decline in 2022 indicates a significant deterioration in liquidity, suggesting possible issues with short-term asset management or increased current liabilities during that period. The subsequent recovery indicates an improvement in liquidity management or asset positions.

The quick ratio, reflecting the company's ability to cover current liabilities with its most liquid assets excluding inventory, follows a similar pattern. It was at 3.64 in 2020, decreasing to 2.83 in 2021, with a substantial fall to 0.56 in 2022, marking a critical liquidity shortage. This ratio increased substantially in the subsequent years, reaching 3.16 in 2023 and 2.86 in 2024, suggesting a return to a more robust and liquid position after the dip in 2022.

The cash ratio, which measures the company's ability to satisfy short-term liabilities with cash and cash equivalents, was 3.64 in 2020, declining to 2.71 in 2021 and further plummeting to 0.46 in 2022. This indicates a severe reduction in available cash assets relative to current liabilities during that year. The ratio recovered in 2023 to 3.05 and further improved to 2.76 in 2024, reflecting a significant restoration in cash holdings relative to short-term obligations.

Overall, the liquidity ratios of CAVA Group, Inc. experienced a marked decline in 2022, reaching concerning lows across all measures, which could indicate operational or liquidity management challenges. However, the subsequent years show a strong rebound, suggesting enhanced liquidity position and improved asset management. These fluctuations highlight the importance of monitoring the company's short-term asset and cash management strategies, especially the critical dip observed in 2022.


Additional liquidity measure

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Cash conversion cycle days -4.17 -1.77 -1.57 -3.73 -12.94

The cash conversion cycle (CCC) of CAVA Group, Inc. has demonstrated a consistent pattern of negative values over the period from December 31, 2020, through December 31, 2024. Specifically, the CCC was measured at -12.94 days in 2020, indicating that the company was able to recover its cash outflows from sales before the inventory was sold and received payment from customers. In 2021, the CCC improved to -3.73 days, suggesting a reduction in the time lag between cash outflows and inflows, although the cycle remained negative.

This trend of decreasing negative CCC continued into 2022, reaching -1.57 days, reflecting a further slight shortening of the cycle. In 2023, the CCC was marginally more negative at -1.77 days, indicating a slight elongation but still maintaining a negative position, which implies that the company generally collects cash from sales before the associated inventory costs are fully paid.

In 2024, the CCC further declined to -4.17 days, signifying an increased efficiency in converting investments in inventory into cash inflows relative to its outflows.

Overall, the persistent negative and relatively stable magnitude of the CCC over these years indicates that CAVA Group, Inc. has maintained a robust working capital cycle characterized by rapid cash recovery, likely supported by efficient receivables collection and inventory management practices. This pattern is typical of a company with a quick turnover of inventory and effective accounts receivable processes, resulting in positive liquidity positioning and operational efficiency.