Choice Hotels International Inc (CHH)

Cash ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cash and cash equivalents	US$ in thousands	26,754	41,566	511,605	234,779	33,766
Short-term investments	US$ in thousands	—	—	—	29,104	—
Total current liabilities	US$ in thousands	942,690	435,898	570,295	255,847	325,888
Cash ratio		0.03	0.10	0.90	1.03	0.10

December 31, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($26,754K + $—K) ÷ $942,690K
= 0.03

The cash ratio of Choice Hotels International Inc has experienced a significant decline over the past five years. In 2021, the cash ratio was 0.90, indicating that the company had sufficient cash reserves to cover 90% of its current liabilities. However, this ratio dropped to 0.03 in 2023, signaling a substantial decrease in the company's ability to cover its short-term obligations with cash on hand.

This declining trend in the cash ratio raises concerns about Choice Hotels' liquidity position and ability to meet its short-term financial obligations. A lower cash ratio could imply that the company may face challenges in paying off its creditors or funding its day-to-day operations solely from its cash reserves. It also suggests a potential increased reliance on other sources of liquidity, such as borrowing or asset liquidation.

It is essential for investors and stakeholders to monitor Choice Hotels' cash position and liquidity management closely, as a further deterioration in the cash ratio may indicate financial distress or operational inefficiencies within the company.