Central Garden & Pet Company A (CENTA)
Quick ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash | US$ in thousands | 488,730 | 177,442 | 426,422 | 652,712 | 497,749 |
| Short-term investments | US$ in thousands | — | — | — | — | 0 |
| Receivables | US$ in thousands | 332,890 | 376,787 | 385,384 | 391,773 | 300,135 |
| Total current liabilities | US$ in thousands | 457,987 | 465,892 | 522,319 | 440,262 | 278,525 |
| Quick ratio | 1.79 | 1.19 | 1.55 | 2.37 | 2.86 |
September 30, 2023 calculation
Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($488,730K
+ $—K
+ $332,890K)
÷ $457,987K
= 1.79
The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It is calculated by dividing the sum of cash, cash equivalents, and accounts receivable by the total current liabilities.
Analyzing Central Garden & Pet Co.'s quick ratio over the past five years reveals some noteworthy trends. The company's quick ratio has demonstrated fluctuations, ranging from 1.29 in 2022 to 2.97 in 2019. The ratio increased to 1.87 in 2023, showing improvement compared to the previous year.
A quick ratio above 1 indicates that the company possesses more than enough liquid assets to cover its short-term liabilities, which is generally considered a favorable position. In this context, Central Garden & Pet Co.'s quick ratio has consistently remained above the 1 threshold, suggesting a healthy liquidity position and the capability to meet its short-term obligations without relying heavily on inventory.
The fluctuation in the quick ratio over the years may suggest changes in the company's liquidity management or shifts in the composition of its current assets and liabilities. An increase in the quick ratio from 2022 to 2023 indicates an improvement in the company's ability to meet short-term obligations with liquid assets, which could be a positive sign for its financial health.
However, while a high quick ratio indicates good liquidity, it may also suggest an underutilization of current assets, such as cash and accounts receivable, which could potentially be invested more effectively. Therefore, management should carefully assess the optimal level of liquidity to ensure efficient use of resources.
In conclusion, Central Garden & Pet Co.'s quick ratio has displayed fluctuations over the past five years, with the 2023 ratio reflecting an improvement in liquidity compared to the previous year. This indicates the company's ability to meet short-term obligations with its liquid assets, and suggests a generally healthy liquidity position.
Peer comparison
Sep 30, 2023