Coty Inc (COTY)

Coty Inc's liquidity ratios have shown fluctuating trends over the past five years, indicating varying levels of the company's ability to meet its short-term obligations.

1. Current ratio: The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has ranged from 0.66 to 1.81. The ratio has been consistently below 1, except for the year 2020, suggesting that Coty Inc may have had difficulty in meeting its short-term obligations with its current assets in most years.

2. Quick ratio: The quick ratio, also known as acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Coty Inc's quick ratio has been notably low, ranging from 0.22 to 0.85 over the past five years. This indicates that the company may have limited ability to meet its short-term obligations without relying on inventory.

3. Cash ratio: The cash ratio, which specifically assesses the company's ability to cover its short-term liabilities with cash and cash equivalents, has ranged from 0.09 to 0.63. Coty Inc's cash ratio has been consistently low, further highlighting potential challenges in meeting short-term obligations solely with available cash.

Overall, Coty Inc's liquidity ratios suggest a relatively weak liquidity position, with low current, quick, and cash ratios over the past five years. This may indicate a need for the company to improve its cash management and liquidity management strategies to enhance its ability to meet short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle is a measure of how efficiently a company manages its working capital, encompassing the time it takes to convert inventory into cash received from customers. In the case of Coty Inc, the trend in the cash conversion cycle has fluctuated over the past five years.

As of June 30, 2024, Coty Inc's cash conversion cycle was reported at -14.41 days, indicating that on average, the company's cash is collected from customers before it pays its suppliers and vendors for inventory. This represents an improvement compared to the previous year, where the cycle was -16.86 days.

In the preceding years, the cash conversion cycle for Coty Inc was also negative, implying effective management of working capital. However, the magnitude of the negative cycle varied, with the lowest point occurring in June 30, 2022, at -11.76 days, and the highest in June 30, 2020, at 9.57 days.

Overall, the negative values of the cash conversion cycle for Coty Inc indicate that the company has been relatively efficient in managing its working capital and converting inventory into cash. The decrease in the cycle from the previous year suggests an improvement in operational efficiency and effectiveness in managing cash flows.