Dayforce Inc. (DAY)

Dayforce Inc.'s liquidity ratios provide insights into the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio measures the firm's ability to cover its short-term liabilities with its short-term assets.
- Dayforce Inc.'s current ratio has been consistently above 1 over the years, indicating that the company has sufficient current assets to cover its current liabilities.
- There was a slight increase in the current ratio from 2020 to 2021 and 2023 to 2024, suggesting an improvement in liquidity position during those years.
- A significant spike in the current ratio in 2024 to 3.38 may be due to a substantial increase in current assets compared to current liabilities, which could indicate improved liquidity or potentially an anomaly that requires further investigation.

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.
- Dayforce Inc.'s quick ratio has also exhibited an improving trend over the years, staying above 1 and generally stable.
- The quick ratio remained consistently higher than the current ratio, indicating the ability to cover current liabilities with more liquid assets excluding inventory.
- Like the current ratio, the quick ratio saw a significant increase in 2024 to 1.99, suggesting a strong ability to meet short-term obligations with highly liquid assets.

3. Cash Ratio:
- The cash ratio is the most conservative measure of liquidity, focusing solely on cash and cash equivalents to cover current liabilities.
- Dayforce Inc.'s cash ratio has followed a similar pattern to the quick ratio, indicating a healthy ability to meet short-term obligations with cash on hand.
- A substantial increase in the cash ratio in 2024 to 1.99 reflects a significant proportion of cash and cash equivalents in relation to current liabilities, indicating a strong liquidity position.

Overall, Dayforce Inc. has shown consistent improvements in its liquidity ratios over the years, with the ratios generally exceeding 1 and indicating a solid ability to meet its short-term financial obligations. The spike in ratios in 2024 may highlight a potential positive shift in the company's liquidity position, which could be a result of strategic financial management decisions or other factors that would warrant further investigation.

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Additional liquidity measure

The cash conversion cycle of Dayforce Inc. has shown a downward trend over the past five years, indicating an improvement in the efficiency of the company's cash management. From 2,737.79 days in December 31, 2020, the cash conversion cycle decreased to 1,975.63 days by December 31, 2022. This suggests that the company has been able to convert its investments in inventory and accounts receivable into cash more quickly.

Notably, by December 31, 2024, the cash conversion cycle reached 0.00 days, which implies that Dayforce Inc. was able to efficiently manage its working capital, thereby eliminating the need for additional financing to support its operations. This could be attributed to the company's effective management of inventory, accounts receivable, and accounts payable, resulting in a more streamlined cash flow process.

Overall, the decreasing trend in the cash conversion cycle signifies an enhancement in Dayforce Inc.'s liquidity position and operational efficiency, which can positively impact the company's financial health and sustainability in the long term.