Carter’s Inc (CRI)

Carter’s Inc's liquidity ratios provide insights into the company's ability to meet its short-term obligations and efficiently manage its current assets.

- The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has shown a decreasing trend from 2.33 in 2019 to 2.15 in 2023. This indicates a slight decline in the company's short-term liquidity position over the years, but the current ratio remains above 2, indicating that Carter’s Inc has sufficient current assets to cover its current liabilities.

- The quick ratio, also known as the acid-test ratio, measures the company's ability to meet short-term obligations using only its most liquid assets. Carter’s Inc's quick ratio has fluctuated over the years, with a significant improvement in 2023 compared to 2022. While the quick ratio in 2023 is lower than in 2021, it indicates that the company may have some difficulty in meeting its short-term obligations without relying on inventory to convert to cash quickly.

- The cash ratio, which is the most stringent measure of liquidity, assesses the company's ability to cover immediate liabilities with cash and cash equivalents only. Carter’s Inc's cash ratio has also varied over the years, showing a significant improvement in 2023. Despite the fluctuations, the company appears to have a higher cash reserve in relation to immediate obligations in 2023 compared to previous years.

Overall, while Carter’s Inc's liquidity ratios have shown some fluctuations over the years, the company maintains a relatively healthy liquidity position with a current ratio consistently above 2, indicating a strong ability to cover short-term obligations. However, the fluctuating trends in the quick ratio and the cash ratio suggest that the company should continue to monitor and manage its liquidity position closely to ensure financial stability.

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Additional liquidity measure

Analyzing Carter’s Inc cash conversion cycle over the past five years reveals fluctuations in the efficiency of its operating cycle. The trend indicates that the company's cash conversion cycle has varied significantly, with a peak of 170.39 days in 2022 and a low of 59.77 days in 2020. In 2023, the cash conversion cycle improved to 117.16 days from the previous year.

A higher cash conversion cycle suggests that Carter’s is taking longer to convert its resources into cash, which could indicate inefficiencies in managing inventory, collecting receivables, or paying creditors. Conversely, a lower cash conversion cycle reflects a faster and more efficient conversion of operating inputs into cash.

Further analysis and comparison with industry benchmarks would provide insights into Carter’s working capital management efficiency and potential areas for improvement. Evaluation of the company's inventory turnover, accounts receivable turnover, and accounts payable turnover ratios could also offer a more comprehensive understanding of its cash conversion cycle dynamics.