Dick’s Sporting Goods Inc (DKS)

The liquidity ratios of Dick’s Sporting Goods Inc indicate the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio, which measures the company's ability to pay its short-term liabilities with its short-term assets, has fluctuated over the period analyzed.
- The current ratio ranged from 1.65 to 1.96, with the highest ratio observed in April 29, 2023.
- Generally, a current ratio above 1 indicates that the company has more current assets than current liabilities, reflecting a positive liquidity position.
- Dick’s Sporting Goods maintained a current ratio above 1 throughout the period, implying a sound ability to cover short-term obligations.

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.
- The quick ratio showed more variation compared to the current ratio, ranging from 0.45 to 0.74.
- A quick ratio below 1 suggests that the company may have difficulties meeting its short-term obligations without relying on inventory sales.
- Dick’s Sporting Goods generally maintained a quick ratio below 1, indicating a reliance on inventory to meet short-term liabilities.

3. Cash Ratio:
- The cash ratio, the most conservative liquidity measure, focuses only on cash and cash equivalents to cover current liabilities.
- The cash ratio ranged from 0.45 to 0.97, with the highest ratio observed in January 31, 2022.
- A cash ratio greater than 1 would mean the company has enough cash to cover all current liabilities immediately, which was not the case for Dick’s Sporting Goods.
- The company held lower cash reserves relative to its current liabilities, potentially indicating a minor liquidity risk.

In conclusion, while the current ratio suggests a comfortable liquidity position for Dick’s Sporting Goods Inc, the quick and cash ratios indicate a slightly weaker liquidity position, with a dependency on inventory to meet short-term obligations. Monitoring all three ratios can provide a comprehensive view of the company's liquidity management.

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Additional liquidity measure

The cash conversion cycle of Dick’s Sporting Goods Inc, a key indicator of its efficiency in managing its working capital, exhibits some fluctuations over the disclosed periods. The cycle calculates the time it takes for the company to convert its investments in inventory into cash receipts from sales, reflecting how quickly it can convert resources into cash flow.

From the data provided, we can see that the cash conversion cycle ranged from a low of 55.26 days on February 3, 2024, to a high of 141.89 days on January 31, 2025. The company shows variability in its ability to manage its cash conversion cycle efficiently, with some periods showing a shorter cycle and others experiencing a prolonged cycle.

Analyzing the trends over the periods, we observe that there are instances of improvement in efficiency, as evidenced by shorter cycles, but there are also instances of challenges, as reflected in longer cycles. Notably, the cycle seems to fluctuate without a clear linear trend, indicating potential operational and financial fluctuations impacting the company's working capital management.

In essence, a careful review and ongoing monitoring of Dick’s Sporting Goods Inc's cash conversion cycle can provide valuable insights into its operational effectiveness, financial health, and potential areas for improvement in managing its working capital efficiently.