Copart Inc (CPRT)

The liquidity ratios of Copart Inc. exhibit a consistent upward trend over the analyzed period, indicating an improvement in the company's ability to meet its short-term obligations.

The current ratio, which measures the company's capacity to cover current liabilities with current assets, increased from 2.79 as of October 31, 2020, to a peak of 8.42 on July 31, 2025. This substantial growth suggests that Copart has significantly enhanced its liquidity position, with ample current assets relative to its short-term liabilities. Such high ratios imply a strong buffer for covering immediate financial obligations, although ratios considerably above 1 may also indicate excess liquidity.

Similarly, the quick ratio, which refines the current ratio by excluding inventories and other less liquid current assets, shows a rising trajectory from 2.49 on October 31, 2020, to 8.13 as of July 31, 2025. This indicates that even when excluding less liquid assets, the company maintains a robust short-term liquidity position.

The cash ratio, representing the most conservative measure of liquidity by focusing solely on cash and cash equivalents, also demonstrates growth from 1.49 to 7.01 during the same period. This emphasizes an increasingly liquid asset base, bolstering the company's ability to promptly address short-term liabilities without reliance on other current assets.

Overall, the data reflects a strategic accumulation of liquid assets and a strengthening liquidity position over the observed timeframe. The persistent increase in all three ratios underscores Copart's enhanced capacity to meet its immediate financial commitments, suggesting strong liquidity management and a conservative approach to short-term financial stability.

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Additional liquidity measure

The provided data illustrates the trends in Copart Inc.'s cash conversion cycle (CCC) over a series of quarterly periods spanning from October 2020 to July 2025. The CCC, which measures the time (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales, fluctuates notably throughout this period.

Initially, the CCC was negative at -34.83 days in October 2020, indicating that the company was able to collect cash from customers before paying its suppliers, a scenario often characteristic of efficient working capital management. This negative cycle persisted into early 2021, with values such as -15.38 days in January and -28.85 days in April, reinforcing the impression of strong cash flow operations and efficient receivables collection relative to payables.

However, a shift appears in July 2021, when the CCC turns positive at 35.88 days, implying a transition where the company started experiencing periods where it paid its suppliers before collecting from customers. The cycle fluctuates subsequently, with negative values reappearing in October 2021 (-18.99 days) and April 2022 (-6.15 days), indicating some resilience in maintaining a short or negative cycle, but with intermittent periods of positive CCC, such as 4.27 days in January 2022 and 40.79 days in July 2022.

In the latter part of 2022 and into 2023, the CCC continues to fluctuate, with notable peaks such as 42.87 days in July 2023, representing a period where the company's working capital cycle was relatively extended. Nevertheless, some periods reveal a return to negative figures, such as -7.39 days in October 2022 and -1.62 days in April 2023, suggesting ongoing efforts or operational conditions that favor quick cash collection relative to payments.

Moving into 2024 and 2025, the pattern becomes more volatile. The CCC shows values close to zero or slightly positive in early 2024 (1.52 days in January), and then a significant increase again to 44.25 days in July 2024, before decreasing to -13.23 days in October 2024. By January 2025, the cycle is near neutral at 1.52 days, but subsequent periods exhibit a negative trend, with -16.30 days in April and -19.20 days in July 2025, suggesting periods where the firm once again benefits from collection and payment cycles that favor cash inflows preceding outflows.

Overall, the data points to a history of highly variable cash conversion cycles, with several periods of negative cycles indicating effective working capital management, coupled with intermittent positive periods suggesting shifts in operational or market conditions. The cyclical fluctuation between negative and positive values reflects ongoing adjustments in operational practices, customer payment behaviors, and supplier terms. The persistence of negative CCC readings in recent periods signals strong cash flow efficiency, although the amplitude of fluctuation warrants attentive operational management to sustain optimal cash conversion performance.