Dollar Tree Inc (DLTR)

The liquidity ratios of Dollar Tree Inc depict the company's ability to meet its short-term obligations and suggest the adequacy of its current assets in covering immediate liabilities. The current ratio has shown some fluctuation over the past five years, ranging from 1.20 to 1.51, with the most recent ratio standing at 1.31 as of Feb 3, 2024. This indicates that for every dollar of current liabilities, Dollar Tree Inc currently has $1.31 of current assets available to meet those obligations.

The quick ratio has remained relatively stable over the years, hovering around 0.15 except for a slight increase to 0.38 on Jan 30, 2021. The quick ratio takes into account only the most liquid current assets (cash, marketable securities, and receivables) to cover current liabilities, excluding inventory. A quick ratio of 0.15 suggests that for every dollar of current liabilities, Dollar Tree Inc has only $0.15 of highly liquid assets readily available for immediate use.

The cash ratio has mirrored the quick ratio trends due to the exclusion of inventory from its calculation. The cash ratio has also ranged between 0.15 to 0.38 over the period, reflecting Dollar Tree Inc's ability to cover immediate liabilities with cash and cash equivalents.

Overall, while the current ratio indicates a slight decrease in liquidity in the most recent year compared to the previous year, the quick ratio and cash ratio have remained relatively constant, albeit at low levels. This implies that Dollar Tree Inc may have some challenges in meeting its short-term obligations with highly liquid assets, particularly excluding inventory. Investors and stakeholders should monitor these ratios closely to assess the company's liquidity position and ability to manage short-term financial obligations effectively.

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See also:

Dollar Tree Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Dollar Tree Inc has shown fluctuations over the last five years. In the most recent fiscal year ending on February 3, 2024, the company's cash conversion cycle decreased to 57.40 days, indicating the time it takes for the company to convert its investments in inventory and other resources into cash through sales and subsequent collections.

Comparing this to the data from previous years, we can see that Dollar Tree Inc's cash conversion cycle was significantly longer in January 28, 2023, at 72.36 days, and January 29, 2022, at 52.73 days. However, the company managed to improve its efficiency in converting resources into cash in the last two years compared to January 30, 2021, where the cash conversion cycle was 43.65 days, and February 1, 2020, at 48.14 days.

Overall, Dollar Tree Inc's management of its working capital and operational efficiency, as reflected in its cash conversion cycle, has shown variability over the past five years. Efforts to streamline operations and manage inventory levels effectively seem to have contributed to a somewhat improved cash conversion cycle in the most recent fiscal year.