The Clorox Company (CLX)

The analysis of The Clorox Company’s liquidity ratios over the provided periods reveals several notable trends and insights.

Starting with the current ratio, which measures a company's ability to meet short-term obligations with its short-term assets, there is a consistent decline from 1.41 as of September 30, 2020, to a low of approximately 0.69 on September 30, 2021. Subsequently, the current ratio generally shows signs of recovery, reaching around 1.00 by September 30, 2024, and fluctuating marginally around that level through to June 2025. Historically, a current ratio above 1 suggests sufficient short-term assets to cover liabilities, but the period between late 2020 and late 2021 indicates a weakening liquidity position, as the ratio dipped below 1.0, potentially signaling increased liquidity risk during that period. The subsequent improvement towards and beyond 1.00 suggests a stabilization in short-term liquidity.

The quick ratio, which excludes inventories from current assets to provide a more stringent assessment of liquidity, exhibits a similar declining trend from 1.02 in September 2020 to a low of approximately 0.30 in December 2021. After this trough, the ratio demonstrates a gradual recovery, reaching around 0.55 by June 2023 and maintaining a similar level through the latest data. This pattern further emphasizes a period of decreased short-term liquidity strength during 2021, with improvement thereafter, although it generally remains below 1.0 during the entire period.

The cash ratio, reflecting the most conservative measure of liquidity by considering only cash and cash equivalents, shows a more pronounced decline from 0.57 in September 2020 to a low of 0.08 in December 2021. Similar to the other ratios, a recovery is observed afterwards, with the ratio rising to 0.23 by September 2023, but it remains below 0.25 in the recent periods. This indicates that at no point during the period was the company solely reliant on its cash holdings to meet its short-term liabilities, and the low levels during 2021 further reflect a tight liquidity position.

Overall, the liquidity ratios of The Clorox Company demonstrate a decline in short-term liquidity early in the observed period, notably during the 2020-2021 timeframe, with ratios falling below generally accepted benchmarks of 1.0 for current and quick ratios. From the latter half of 2021 onward, subsequent ratios show signs of gradual recovery, suggesting improved capacity to meet short-term obligations, although liquidity metrics remain relatively modest and below the levels often considered as comfortably liquid. These trends indicate periods of financial stress followed by stabilization, and they underscore the importance of monitoring liquidity to assess the company’s resilience in fulfilling near-term liabilities.

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Additional liquidity measure

The Clorox Company's cash conversion cycle (CCC) data over the analyzed period reveals significant fluctuations, characterized by alternating periods of negative and positive values. A negative CCC indicates that the company's cash inflows from sales occur before the cash outflows associated with inventory and accounts payable, reflecting an efficient working capital cycle and swift cash generation relative to its operational cycle.

From September 30, 2020, through March 31, 2021, the CCC consistently remained negative, ranging from -47.40 days to -36.82 days, indicating that Clorox was able to generate cash flow ahead of its payment obligations. During this phase, the negative values suggest effective management of receivables and payables, with inventory turnover likely outpacing the time lag in accounts payable.

Between June 30, 2021, and March 31, 2022, the CCC gradually deteriorated towards less negative figures, reaching -27.86 days, implying a slight reduction in cash flow efficiency but still maintaining a predominantly favorable cycle. Notably, on June 30, 2022, the CCC turned positive at 18.57 days, signaling a shift where the company required more time to convert its investments in inventory and receivables into cash than its payables could cover, thus temporarily weakening liquidity efficiency.

After this point, the CCC reverted to negative territory multiple times but fluctuated within a narrow range, suggesting ongoing periods of operational efficiency interspersed with occasional challenges in maintaining a negative cycle. The most recent data indicates a significant deterioration on March 31, 2025, with a theoretical CCC of -99.85 days. However, this appears inconsistent with surrounding data points and likely reflects a data anomaly or an unusual operational event.

Overall, the trend demonstrates that The Clorox Company generally maintains a predominantly negative CCC, which is characteristic of companies with efficient working capital management and prompt cash conversion cycles, especially notable during periods when the CCC turned positive. The cyclical nature of these fluctuations underscores the influence of operational, seasonal, or strategic factors on working capital dynamics.