The Clorox Company (CLX)

The liquidity ratios of The Clorox Company indicate the company's ability to meet its short-term obligations and manage its current assets effectively.

The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has shown some fluctuations but generally remained close to 1. This suggests that the company has enough current assets to cover its short-term debts, although it has dipped below 1 in some periods, indicating potential liquidity concerns.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. This ratio has also fluctuated over time but tends to be lower than the current ratio. The lower quick ratio indicates that the company may have difficulty meeting its short-term obligations without relying on inventory.

The cash ratio, which is the most stringent measure of liquidity as it only considers cash and cash equivalents, has shown significant variations over the periods. In some periods, the cash ratio has been very low, indicating that the company has limited readily available cash to cover its short-term obligations.

Overall, the liquidity ratios of The Clorox Company suggest that while the company generally has sufficient current assets to cover its short-term liabilities, there have been instances where liquidity levels were lower, particularly in terms of quick and cash ratios. This may indicate potential challenges in meeting short-term obligations without having to rely on inventory or access to additional sources of cash.

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Additional liquidity measure

The cash conversion cycle of The Clorox Company has shown fluctuations over the recent quarters. The company's cash conversion cycle measures the average time it takes for the company to convert its investments in inventory into cash flows from sales to customers, and then back into cash again with the payment of accounts receivable.

Looking at the data, we can observe that the cash conversion cycle has varied significantly from quarter to quarter. For instance, in June 2024, the cycle was relatively short at 14.16 days, indicating efficient management of inventory, sales, and accounts receivable. However, in March and December 2024, the cycle increased significantly to approximately 79.78 days and 74.30 days, respectively, suggesting potential inefficiencies in managing working capital during these periods.

Furthermore, comparing the cycles across different quarters, it is evident that there is a recurring pattern of fluctuations, with the cycle lengths varying between shorter and longer periods. This variability may indicate challenges in maintaining consistent and optimal levels of inventory, sales, and accounts receivable management.

Overall, the analysis of The Clorox Company's cash conversion cycle reveals the importance of closely monitoring working capital management practices to ensure efficiency in converting investments into cash flows. It may be beneficial for the company to focus on implementing strategies to reduce the cycle length and smoothen out the fluctuations for improved financial performance and liquidity management.