Cintas Corporation (CTAS)
Liquidity ratios
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.74 | 2.39 | 1.84 | 1.47 | 2.61 |
| Quick ratio | 0.87 | 1.04 | 0.78 | 0.87 | 1.15 |
| Cash ratio | 0.19 | 0.10 | 0.06 | 0.40 | 0.16 |
The liquidity ratios of Cintas Corporation over the past five years show varying levels of liquidity and ability to meet short-term obligations.
1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Cintas Corporation's current ratio has fluctuated over the years, ranging from 1.47 to 2.61. A current ratio above 1 indicates that the company has more current assets than current liabilities, with a higher ratio implying a stronger ability to meet short-term obligations. The current ratio decreased from 2020 to 2021, improved in 2022, and then decreased again in 2023 and 2024, showing some inconsistency in the management of short-term assets and liabilities.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Cintas Corporation's quick ratio has ranged from 0.78 to 1.15 over the five-year period. A quick ratio above 1 is generally considered healthy, indicating that the company can meet its short-term obligations without relying on selling inventory. Similar to the current ratio trend, the quick ratio also showed fluctuations throughout the years, suggesting potential challenges in managing short-term liquidity without inventory.
3. Cash Ratio: The cash ratio measures the company's ability to meet short-term liabilities using only cash and cash equivalents. Cintas Corporation's cash ratio has varied from 0.06 to 0.40, with the highest ratio in 2021 and the lowest in 2020. A cash ratio below 1 indicates that the company relies on more than just cash to meet short-term obligations. The substantial increase in the cash ratio from 2020 to 2021 could suggest a deliberate strategy to increase cash reserves for potential uncertainties or investments.
Overall, Cintas Corporation has shown some inconsistency in its liquidity position over the past five years, with fluctuations in the current, quick, and cash ratios. Further analysis of the company's operational efficiency and working capital management may help determine the underlying factors contributing to these fluctuations in liquidity ratios.
See also:
Additional liquidity measure
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 56.66 | 77.92 | 84.49 | 91.12 | 61.70 |
The cash conversion cycle for Cintas Corporation has shown variability over the past five years. In May 2024, the company's cash conversion cycle improved to 56.66 days, indicating that the company is managing its cash flow more efficiently compared to the previous year. This is a positive sign as a lower cash conversion cycle implies that Cintas is able to convert its investments in inventory and accounts receivable into cash more quickly.
Looking back, in May 2023, the cash conversion cycle was higher at 77.92 days, suggesting that it took the company longer to convert its investments into cash. However, in the two preceding years, the cash conversion cycle showed a trend of increasing, reaching its peak at 91.12 days in May 2021, before decreasing in May 2022.
The improvement in the cash conversion cycle from 2021 to 2024 indicates that Cintas has been able to streamline its operations, manage its inventory efficiently, and collect its receivables more promptly. This trend is positive for the company's liquidity and cash flow management.
Overall, a lower cash conversion cycle is favorable as it signifies that Cintas is able to optimize its working capital and generate cash more effectively, which is crucial for sustaining operational activities and supporting future investments.