Domino's Pizza Inc Common Stock (DPZ)

The liquidity ratios of Domino's Pizza Inc Common Stock indicate the company's ability to meet its short-term obligations with its current assets.

1. Current Ratio: The trend in the current ratio shows a slight decrease from 1.85 in December 2020 to 1.46 in December 2021, and then a relatively stable level around 1.47 to 1.49 until a significant drop to 0.56 in December 2024. This ratio suggests that the company may have had more than enough current assets to cover its current liabilities in the earlier years, but there is a concerning decline in liquidity by the end of 2024.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, paints a more conservative picture of liquidity compared to the current ratio. The trend shows a continuous decline from 0.91 in December 2020 to 0.31 in December 2024. This declining trend signifies a reduction in the company's ability to cover its short-term liabilities with its most liquid assets.

3. Cash Ratio: The cash ratio measures the company's ability to pay off its current liabilities with only its cash and cash equivalents. The trend in the cash ratio indicates a decreasing trend from 0.39 in December 2020 to 0.12 in December 2024. This declining trend signifies a decreasing ability to cover short-term obligations solely with cash on hand.

Overall, the declining trends in the quick ratio and cash ratio, particularly by the end of 2024, raise concerns about Domino's Pizza Inc Common Stock's liquidity position and its ability to meet its short-term obligations with its current assets. Further analysis and monitoring of the liquidity ratios are recommended to assess the company's financial health accurately.

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Additional liquidity measure

The cash conversion cycle of Domino's Pizza Inc Common Stock has shown a gradual increase over the years, from 17.66 days as of December 31, 2020, to 22.06 days as of December 31, 2024. This indicates that the company is taking longer to convert its investments in raw materials and inventory into cash from sales. A longer cash conversion cycle may suggest inefficiencies in the company's operations, such as slower inventory turnover or longer accounts receivable collections. It is important for the company to monitor and manage its cash conversion cycle effectively to ensure efficient working capital management and overall financial health.