Copart Inc (CPRT)

Quick ratio

		Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Cash	US$ in thousands	957,395	1,384,240	1,048,260	477,718	186,319
Short-term investments	US$ in thousands	1,406,590	—	—	—	—
Receivables	US$ in thousands	708,612	628,455	500,640	376,947	386,791
Total current liabilities	US$ in thousands	492,769	440,889	421,031	356,044	282,004
Quick ratio		6.24	4.57	3.68	2.40	2.03

July 31, 2023 calculation

Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($957,395K + $1,406,590K + $708,612K) ÷ $492,769K
= 6.24

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations using its most liquid assets. The formula for the quick ratio is (Current Assets - Inventory) / Current Liabilities, and it provides a more stringent assessment of a company's liquidity than the current ratio because it excludes inventory from current assets.

Looking at Copart, Inc.'s quick ratio over the past five years, we observe a consistent upward trend, indicating an improving ability to meet short-term obligations with liquid assets.

In 2019, the quick ratio was 2.36, signifying that for every dollar of current liabilities, Copart, Inc. had $2.36 in highly liquid assets. This ratio has since increased to 2.65 in 2020, 3.94 in 2021, 4.86 in 2022, and 6.54 in 2023.

The significant increase in the quick ratio from 2019 to 2023 reflects an impressive enhancement in the company's liquidity position. It suggests that Copart, Inc. has been able to either reduce its current liabilities or increase its highly liquid assets, or a combination of both, which is a positive sign for the company's financial health.

In conclusion, the consistent improvement in Copart, Inc.'s quick ratio from 2019 to 2023 indicates a strengthening ability to meet short-term obligations using highly liquid assets. This trend demonstrates the company's sound liquidity management and financial stability over the years.