Dollar General Corporation (DG)

Dollar General Corporation's liquidity ratios show fluctuations over time. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has varied between 1.02 to 1.44 over the past few years. Although the ratio has generally remained above 1, indicating a healthy liquidity position, it experienced a dip to 0.97 in April 2022 and then improved to 1.44 in May 2020.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has ranged from 0.05 to 0.55. This suggests that Dollar General may have had challenges in meeting its short-term obligations without relying on inventory. The ratio hit its lowest point of 0.05 in several periods, reflecting potential liquidity concerns during those times.

The cash ratio, which focuses solely on cash and cash equivalents to cover short-term liabilities, has shown greater stability compared to the quick ratio. It has generally been above 0.05, indicating Dollar General's ability to meet immediate obligations with cash on hand. The ratio peaked at 0.55 in several periods, indicating a strong cash position during those times.

Overall, while Dollar General Corporation has maintained a current ratio above 1 to meet its short-term obligations, the fluctuating quick ratio highlights potential challenges in liquidity management. The cash ratio, on the other hand, indicates a consistent ability to cover short-term liabilities with cash reserves. Investors and analysts should closely monitor these liquidity ratios to assess Dollar General's short-term solvency and financial health.

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See also:

Dollar General Corporation Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The cash conversion cycle of Dollar General Corporation has shown fluctuations over the past few reporting periods, indicating changes in the company's efficiency in managing its cash flow.

The cash conversion cycle measures the time it takes for a company to convert its investment in inventory and other resources into cash received from customers. A shorter cash conversion cycle is generally favorable as it signifies quicker turnover of inventory and faster collection of receivables.

Dollar General's cash conversion cycle ranged from a high of 43.39 days in August 2023 to a low of 13.26 days in July 2020. In recent periods, the trend has been somewhat erratic, with periods of both increases and decreases. Notably, the company experienced a significant improvement in its cash conversion cycle from August 2022 to July 2023, where it reduced from 30.16 days to 13.26 days, indicating a more efficient operation during that period.

The shorter cash conversion cycles in early 2020 and mid-2021 suggest that Dollar General was effectively managing its cash flow, possibly through inventory control and efficient accounts receivable management. However, the increase in the cash conversion cycle from early 2023 to mid-2024 may indicate challenges in managing inventory or delays in collecting payments from customers.

Overall, while Dollar General has shown periods of efficient cash conversion cycles, it is essential for the company to focus on implementing strategies to maintain consistency and improve its cash conversion cycle to ensure optimal working capital management and financial performance.