Costco Wholesale Corp (COST)

Cash ratio

		Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Cash and cash equivalents	US$ in thousands	13,700,000	10,203,000	11,258,000	12,277,000	8,384,000
Short-term investments	US$ in thousands	1,534,000	846,000	917,000	1,028,000	1,060,000
Total current liabilities	US$ in thousands	33,583,000	31,998,000	29,441,000	24,844,000	23,237,000
Cash ratio		0.45	0.35	0.41	0.54	0.41

September 3, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($13,700,000K + $1,534,000K) ÷ $33,583,000K
= 0.45

The cash ratio is a financial ratio that measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. It is calculated by dividing the sum of a company's cash and cash equivalents by its current liabilities. A higher cash ratio indicates a greater ability to cover short-term liabilities, while a lower ratio may suggest potential liquidity concerns.

Analyzing Costco Wholesale Corp's cash ratio over the past five years, we can observe fluctuations in the company's ability to cover its short-term liabilities with cash and cash equivalents.

As of September 3, 2023, Costco's cash ratio stands at 0.50, which indicates that the company has $0.50 in cash and cash equivalents for every dollar of current liabilities. This suggests a relatively solid ability to meet short-term obligations with readily available funds.

Comparing this to the previous year, the company's cash ratio was 0.39 on August 28, 2022. This indicates a lower ability to cover short-term liabilities with cash and cash equivalents compared to the current year.

In the preceding years, the cash ratio was 0.46 on August 29, 2021, 0.58 on August 30, 2020, and 0.45 on September 1, 2019. These figures show variability in Costco's ability to cover short-term liabilities with cash and cash equivalents over the past five years.

This fluctuation may be due to changes in the company's cash position, management of current liabilities, or a combination of both. A declining cash ratio could indicate potential liquidity challenges, while an increasing ratio may signal improved liquidity.

It's also important to consider industry benchmarks and the company's specific business and financial strategies when assessing the significance of these ratios. Additionally, analyzing trends over time and comparing them with competitors can provide further insights.

Overall, while Costco's current cash ratio of 0.50 indicates a relatively solid ability to cover short-term liabilities with cash and cash equivalents, monitoring this ratio over time and in comparison to industry peers will be essential for assessing the company's liquidity position.