Central Garden & Pet Company (CENT)

The liquidity ratios of Central Garden & Pet Co. indicate the company's ability to meet its short-term obligations.

The current ratio has shown a fluctuating trend over the last five years, ranging from 2.96 in 2021 to 4.69 in 2019. This ratio reached 3.73 as of September 30, 2023, signaling that the company had $3.73 in current assets for every $1 of current liabilities. This indicates a strong liquidity position, as higher current ratios suggest a greater ability to cover short-term obligations.

The quick ratio has also exhibited significant variability, ranging from 1.29 in 2022 to 2.97 in 2019. As of September 30, 2023, the quick ratio improved to 1.87, illustrating that the company had $1.87 in highly liquid assets for every $1 of current liabilities. This ratio measures the company's ability to meet its short-term obligations using its most liquid assets, excluding inventory. The improvement in this ratio suggests that the company has a sufficient level of liquid assets to cover its short-term liabilities.

The cash ratio has also fluctuated over the years, ranging from 0.48 in 2022 to 1.90 in 2019. As of September 30, 2023, the cash ratio improved to 1.14, reflecting that the company had $1.14 in cash and cash equivalents for every $1 of current liabilities. This ratio provides insight into the company's ability to meet short-term obligations using its cash and cash equivalents. The increase in the cash ratio suggests an enhanced ability to settle short-term liabilities using its available cash.

In summary, Central Garden & Pet Co. has displayed fluctuations in its liquidity ratios over the last five years. The current ratio indicates a strong overall liquidity position, while the quick and cash ratios illustrate the company's capacity to meet short-term obligations using its liquid assets and cash reserves.

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Additional liquidity measure

The cash conversion cycle of Central Garden & Pet Co. shows the number of days it takes for the company to convert its investments in inventory into cash receipts from customers. A shorter cash conversion cycle indicates better liquidity and efficient management of working capital.

From the data provided, we observe a fluctuating trend in the cash conversion cycle over the past five years. In 2023, the cycle was 136.68 days, representing an increase from the previous year's 153.56 days. This indicates a less efficient management of working capital, as the company took longer to convert its inventory into cash receipts from customers.

Comparing the most recent data to the cycle in 2019, we note an increase from 114.87 days to 136.68 days. This upward trend suggests a potential deterioration in the company's ability to manage its working capital efficiently.

Overall, the trend in Central Garden & Pet Co.'s cash conversion cycle indicates a need for further scrutiny into its inventory management and cash collection processes to potentially improve working capital efficiency and overall liquidity.