The Clorox Company (CLX)

The Clorox Company's liquidity ratios show a mixed trend over the past five years.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term obligations with its current assets.
- The current ratio has fluctuated between 0.89 and 1.42 over the past five years, with the latest ratio as of June 30, 2024, standing at 1.03.
- A current ratio greater than 1 indicates that the company has more current assets than current liabilities, which can be seen as a positive sign for short-term solvency.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets.
- The quick ratio for The Clorox Company has ranged from 0.45 to 1.07 over the past five years, with the latest ratio at 0.57 as of June 30, 2024.
- A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on its inventory.

3. Cash Ratio:
- The cash ratio measures a company's ability to cover its short-term liabilities with its cash and cash equivalents alone.
- The cash ratio for The Clorox Company has varied from 0.10 to 0.61 over the past five years, with the lowest ratio recorded as 0.13 as of June 30, 2024.
- A low cash ratio may indicate that the company may not have sufficient liquid funds to meet its immediate short-term obligations without relying on other current assets.

Overall, The Clorox Company's current ratio indicates improved short-term solvency in the latest period, while the quick ratio and cash ratio suggest a relatively tighter liquidity position compared to previous years. Monitoring these ratios can help assess the company's ability to meet its short-term obligations and manage liquidity effectively.

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Additional liquidity measure

The cash conversion cycle of The Clorox Company has shown a decreasing trend over the past five years, indicating an improvement in the efficiency of its working capital management.

In the most recent fiscal year (ending June 30, 2024), the company's cash conversion cycle was 14.26 days, which was lower compared to the prior year's 15.39 days. This suggests that the company was able to convert its investments in inventory into cash more quickly in the latest period.

Furthermore, when looking back at the data from June 30, 2020, where the cash conversion cycle stood at 26.25 days, there has been a significant improvement in the efficiency of working capital management over the analysis period.

Overall, a decreasing cash conversion cycle can indicate that The Clorox Company is managing its inventory, accounts receivable, and accounts payable more effectively, leading to a more streamlined cash flow and potentially higher profitability. However, it is essential for the company to continue monitoring and optimizing its working capital cycle to maintain and enhance its financial performance.