The Clorox Company (CLX)

The liquidity position of The Clorox Company over the period from June 30, 2020, through March 31, 2025, reveals notable fluctuations across the key liquidity ratios—current ratio, quick ratio, and cash ratio.

Initially, the current ratio demonstrated a downward trend from 1.42 in June 2020 to a low of approximately 0.67 at the end of 2021, reflecting a diminishing ability to meet short-term obligations with its total current assets. This ratio then exhibited a gradual recovery, rising above 0.9 by June 30, 2023, and reaching approximately 1.03 by June 30, 2024, indicating improved liquidity and a capacity to cover short-term liabilities with current assets.

The quick ratio experienced a more pronounced decline within the same period, decreasing from 1.07 at June 30, 2020, to around 0.30 in December 2021. This reduction indicates that the company’s most liquid assets, excluding inventory, became less capable of covering short-term obligations during this period. Post-2021, the quick ratio showed signs of recovery, gradually increasing to approximately 0.55 by September 30, 2023, thereby suggesting improved liquidation of assets aside from inventory.

The cash ratio, which measures the most liquid assets in relation to current liabilities, followed a declining trend from 0.61 in June 2020 to a low of about 0.08 at the end of 2021. Although it experienced some recovery afterward, the cash ratio remained relatively low, fluctuating around 0.10 to 0.23 in 2023 and 2024. This pattern indicates that the company's cash holdings as a proportion of current liabilities remained modest throughout the period, with limited immediate liquidity available in cash to cover short-term obligations.

Overall, the liquidity ratios suggest that The Clorox Company faced a period of diminished liquidity capacity between mid-2020 and the end of 2021, potentially influenced by operational or financial factors that constrained its ability to meet short-term liabilities with liquid assets. Nevertheless, subsequent gradual improvements in the current and quick ratios indicate efforts toward restoring liquidity levels, though the cash ratio’s persistent low levels reflect a continued reliance on non-cash current assets or longer-term asset management strategies.

---

Additional liquidity measure

The cash conversion cycle (CCC) of The Clorox Company has exhibited significant variation over the analyzed periods from June 2020 through March 2025. Initially, at June 30, 2020, the CCC was positive at approximately 23.12 days, indicating that the company took that many days to convert its investments in inventory and receivables into cash from its payables period.

Subsequently, from September 2020 onward, the CCC shifted into negative territory, reaching as low as -47.40 days by September 30, 2020, and maintaining negative values through most of 2020 and 2021. Negative CCC values suggest that the company is able to receive cash from sales before it needs to pay its suppliers, implying a highly efficient working capital management and a favorable supplier payment strategy.

Throughout 2021, the CCC remained negative, with fluctuations but generally maintaining a pattern of being below zero, achieving lows near -37 days by the end of 2021. This indicates a sustained period where the company's cash inflows from receivables considerably precede its cash outflows to pay suppliers.

In 2022, the negative trend continued, with values slightly improving toward positive in June 2022 (18.57 days), reflecting a temporary shift where inventory and receivables took longer to convert or a change in payment cycles. However, from September 2022 onwards, the CCC reverted definitively to negative, reaching as low as -46.32 days by March 2023, and further declining thereafter.

The period ending June 30, 2023, saw a brief return to a positive CCC at 7.51 days, suggesting a short-term change in operational or payment practices. Nonetheless, the subsequent periods demonstrated a reversion to highly negative values: September 2023 recorded -53.56 days, December 2023 at -51.46 days, and March 2024 nearly the same at -51.35 days, illustrating a sustained pattern of negative CCCs.

Notably, the latest data point for March 31, 2025, indicates a substantial shift with a CCC of approximately -99.85 days. This implies that the company's cash inflows during this period considerably outpaced its cash outflows, with receivables and inventories being converted into cash well before payments were due to suppliers.

Overall, this analysis reveals that The Clorox Company has persistently maintained a negative cash conversion cycle for most of the recent period. This pattern indicates that the company effectively operates with a significant cash inflow advantage due to early collections relative to payments, allowing for optimized working capital and improved liquidity management. The variability and sustained negative values imply a strategic focus on supplier payment terms and receivables collection policies that favor early cash receipt, enhancing operational flexibility and liquidity positioning.