Capri Holdings Ltd (CPRI)

Capri Holdings Ltd's liquidity ratios indicate its ability to meet short-term obligations and manage cash flow efficiently.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has been fluctuating over the past five years. The ratio decreased from 1.35 in 2020 to 0.95 in 2024, which suggests a weaker liquidity position in the most recent year. A current ratio below 1 may indicate potential difficulties in meeting short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similarly, the quick ratio has shown a declining trend from 0.64 in 2020 to 0.31 in 2024. This decline indicates a decreasing ability to cover immediate liabilities without relying on inventory.

The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has also exhibited a declining trend. Falling from 0.42 in 2020 to 0.12 in 2024, the cash ratio suggests that Capri Holdings may have limited cash reserves relative to its current liabilities.

Overall, the decreasing trend in these liquidity ratios over the past five years raises concerns about Capri Holdings Ltd's short-term liquidity position. It indicates a potential strain on the company's ability to meet its immediate financial obligations and highlights the importance of closely monitoring and managing its cash flow in the future.

---

Additional liquidity measure

The cash conversion cycle for Capri Holdings Ltd has exhibited fluctuations over the past five years. The company's cash conversion cycle decreased from 45.73 days in 2020 to 54.07 days in 2021, indicating a decrease in efficiency in converting resources into cash during that period. However, there was an improvement in the cash conversion cycle in 2022, where it further increased to 69.81 days.

Subsequently, in 2023, there was a decrease in the cash conversion cycle to 67.22 days, suggesting an enhancement in efficiency compared to the previous year. The most recent data for 2024 shows a further reduction in the cash conversion cycle to 58.09 days, indicating that Capri Holdings Ltd has been able to convert its resources into cash more efficiently.

Overall, the trend in the cash conversion cycle for Capri Holdings Ltd has been somewhat inconsistent over the past five years, with fluctuations in efficiency observed. It is essential for the company to continue monitoring and managing its cash conversion cycle to ensure optimal efficiency in converting resources into cash.