Choice Hotels International Inc (CHH)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 0.31 | 0.80 | 1.34 | 1.69 | 0.73 |
| Quick ratio | 0.27 | 0.72 | 1.28 | 1.50 | 0.54 |
| Cash ratio | 0.03 | 0.10 | 0.90 | 1.03 | 0.10 |
Choice Hotels International Inc's liquidity ratios have shown a declining trend over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, decreased from 1.69 in 2020 to 0.31 in 2023. This indicates a significant deterioration in the company's short-term liquidity position.
Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, also decreased from 1.50 in 2020 to 0.27 in 2023. This indicates a decreasing ability to cover current liabilities with the most liquid assets.
The cash ratio, which specifically measures the company's ability to cover current liabilities with cash and cash equivalents, declined from 1.03 in 2020 to 0.03 in 2023. This suggests that Choice Hotels International Inc may have limited cash reserves to meet its short-term obligations.
Overall, the decreasing trend in liquidity ratios raises concerns about the company's ability to manage its short-term financial obligations. It is important for investors and stakeholders to closely monitor Choice Hotels International Inc's liquidity position and assess the company's ability to maintain adequate levels of liquidity going forward.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -56.01 | -108.25 | -79.89 | -94.73 | -88.65 |
Choice Hotels International Inc's cash conversion cycle has shown fluctuations over the past five years. The company's cash conversion cycle was -56.01 days at the end of 2023, indicating that on average, the company is able to convert its investments in inventory and accounts receivable back into cash in a shorter period compared to the previous years.
In 2022, the cash conversion cycle was -108.25 days, reflecting a significant improvement from the previous year. However, in 2021 and 2020, the cycle was -79.89 days and -94.73 days, respectively, indicating that the company took slightly longer to convert its investments into cash during those years.
In 2019, the cash conversion cycle was -88.65 days, showing a modest improvement compared to the following years. Overall, the negative values of the cash conversion cycle suggest that Choice Hotels International Inc has been effectively managing its working capital, turning inventory and receivables into cash quickly.