Coty Inc (COTY)

The liquidity ratios of Coty Inc. over the specified period indicate a nuanced picture of the company’s short-term financial health.

The current ratio, which measures a company’s ability to cover its current liabilities with its current assets, shows some fluctuation but overall remains within a narrow range of 0.66 to 0.77. Specifically, the ratio declined from 0.74 as of June 30, 2021, to a low of 0.66 in 2022, before modestly recovering to 0.75 in 2023 and maintaining that level through 2024 and 2025. This suggests that throughout the period, the company consistently had slightly less than one dollar of current assets for every dollar of current liabilities, implying a potential challenge in meeting short-term obligations solely through current assets.

The quick ratio, which refines the current ratio by excluding inventories—considered less liquid—further illustrates a less favorable liquidity position in 2022, with a sharp decline from 0.78 in June 2021 to 0.26. Post-2022, the quick ratio increased slightly, reaching 0.31 in 2023 and 2024, and marginally stabilizing at the same level in 2025. Despite these improvements, the ratios remain well below 1.0, indicating that a substantial portion of current assets is tied up in less liquid assets, and the company may face difficulties in settling short-term liabilities without relying on inventory sales or additional financing.

The cash ratio, which considers only cash and cash equivalents, presents a more concerning picture. It drops sharply from 0.63 in June 2021 to a negligible 0.09 in 2022 and remains at this low level through 2023 and 2024 before slightly increasing to 0.10 in 2025. This indicates a very limited cash reserve relative to current liabilities, suggesting that Coty Inc. has minimal immediate cash assets available to meet short-term obligations without converting other assets or securing additional cash inflows.

In summary, Coty Inc.'s liquidity metrics over this period reveal persistent liquidity constraints, particularly highlighted by low quick and cash ratios. Although the current ratio improved slightly toward 2025, it remains below the generally acceptable threshold of 1.0, signaling potential challenges in short-term financial flexibility. Such ratios suggest significant reliance on less liquid assets and minimal cash reserves, which could pose risks under adverse cash flow scenarios, underlining the importance of ongoing liquidity management strategies.

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Additional liquidity measure

The analysis of Coty Inc.'s cash conversion cycle over the specified periods reveals significant fluctuations and an overall negative trend, indicating the company's efficiency in managing its working capital.

From June 30, 2021, to June 30, 2025, the cash conversion cycle (CCC) has consistently remained negative, reflecting that the company routinely collects cash from sales before it needs to settle its payables. Specifically, the CCC was recorded at -73.59 days in mid-2021, increased to -84.53 days in 2022, then decreased to -67.29 days in 2023, followed by a slight increase to -78.73 days in 2024, and finally widened considerably to -160.38 days in 2025.

The negative values indicate that Coty Inc. typically benefits from favorable working capital management, with cash inflows outpacing cash outflows related to inventory and receivables. The notable shift in 2025, with a substantial increase in the negative value, suggests an improvement in the company's cash collection relative to its payables. A more negative CCC implies that the firm is able to generate cash inflows more rapidly relative to its cash outflows, thus reducing the need for external financing and enhancing liquidity.

This pattern of fluctuation may be associated with changes in operational efficiency, supply chain management, or strategic adjustments in credit terms. The pronounced elongation of the negative cycle in 2025 indicates a strengthened position in converting sales into cash before settling expenses, which could be advantageous for liquidity and working capital stability.

In summary, Coty Inc. has maintained a predominantly negative cash conversion cycle throughout the observed period, with fluctuations reflecting operational and strategic dynamics. The significant widening of this negative cycle in 2025 underscores an improved cash management position, potentially providing greater financial flexibility and resilience.