Cintas Corporation (CTAS)

The liquidity position of Cintas Corporation over the period from August 2020 through May 2025 exhibits notable fluctuations across various ratios, reflecting changes in short-term asset management and the company's ability to meet its immediate obligations.

Current Ratio: This ratio, which measures the company's capacity to cover current liabilities with current assets, shows an overall declining trend from 2.44 in August 2020 to a low of approximately 1.12 in May 2024. Despite some interim increases, such as reaching 2.56 in August 2023, the ratio generally decreased during the period, indicating a reduction in liquidity buffer. The current ratio remains above 1.0 throughout the period, suggesting that the company maintains sufficient current assets relative to current liabilities, albeit with diminishing margins.

Quick Ratio: Also known as the acid-test ratio, this metric filters out less liquid assets and focuses on the most readily available assets. It exhibited a similar declining trend initially, declining from approximately 1.40 in August 2020 to a low of around 0.44 in February 2022, which signifies a tightening in liquidity for immediate obligations. Subsequently, it rebounded, reaching over 1.10 in August 2023 and maintaining levels above 1.00 through May 2025. The improvement in the quick ratio from its lows suggests enhanced short-term liquidity for immediately payable liabilities after 2022, although it remains somewhat more conservative compared to the current ratio.

Cash Ratio: This ratio, the most conservative liquidity measure, assesses the company's ability to cover current liabilities with cash and cash equivalents. It started at 0.61 in August 2020, peaked modestly at 0.64 in February 2021, then declined sharply to a nadir of 0.03 in February 2022. Thereafter, the cash ratio showed a gradual recovery, reaching a maximum of approximately 0.19 in May 2024, with fluctuations thereafter. Throughout the period, the cash ratio remained well below 1.0, indicating reliance on other current assets beyond cash to meet short-term obligations.

Overall, the data reveals that Cintas' liquidity ratios experienced periods of tightening, particularly between 2020 and early 2022, with the most significant contractions observed in the cash ratio. Post-2022, there has been a trend of gradual improvement, especially in the quick ratio and current ratio, suggesting efforts or shifts towards maintaining better liquidity buffers. Nevertheless, the company consistently maintains ratios above critical thresholds (such as 1.0 for current and quick ratios), indicating adequate short-term liquidity, though margins have narrowed at times, reflecting potential caution in asset liquidity management during the observed period.

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See also:

Cintas Corporation Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The analysis of Cintas Corporation’s cash conversion cycle (CCC) over the specified period indicates notable trends and periods of variation. From August 31, 2020, through May 31, 2025, the CCC fluctuated within a relatively broad range, reflecting changes in the company's operational efficiency related to inventory management, receivables, and payables.

Initially, between August 2020 and August 2023, the CCC remained relatively stable, oscillating around an average of approximately 146 to 153 days. The highest observed cycle was on November 30, 2021, at 153.33 days, indicating a longer duration for converting investments into cash receipts, potentially due to extended receivables or inventory turnover periods. Conversely, during this period, the CCC experienced occasional minor decreases, such as in May 2023 (143.36 days) and August 2023 (142.10 days).

A conspicuous and substantial reduction in the CCC is evident starting February 29, 2024. The cycle sharply drops from around 141.59 days on November 30, 2023, to approximately 59.65 days on February 29, 2024. This near halving suggests significant improvements in cash flow efficiency, likely attributable to enhanced receivables collection, better inventory management, or extended payment terms with suppliers.

Subsequently, the CCC continues to decline through May 2024, reaching approximately 52.51 days, and maintains a low level through the subsequent periods, with minor fluctuations. By August 31, 2024, the cycle stabilizes around 48.63 days, and into November 2024 and February 2025, it remains between approximately 49.03 and 51.20 days.

This downward trend indicates a transition toward more efficient operations, reducing the time between cash outflows and inflows. The marked decrease in early 2024 suggests that the company significantly optimized its working capital management, improving liquidity and cash conversion speed considerably. Overall, the trend demonstrates a shift from a longer, more extended period of cash conversion to a much shorter cycle, enhancing the company's operational liquidity and potentially its overall financial health.