Domino’s Pizza Inc (DPZ)

Dominos Pizza Inc's liquidity ratios have shown some fluctuation over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has varied between 1.46 and 1.85 during this period. The current ratio has generally been above 1, indicating that Dominos Pizza Inc has had sufficient current assets to cover its current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Dominos Pizza Inc's quick ratio has ranged from 0.66 to 0.93 over the past five years. A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on inventory.

Lastly, the cash ratio, which is the most stringent liquidity ratio as it measures the company's ability to cover its current liabilities with its cash and cash equivalents only, has fluctuated between 0.18 and 0.46. The cash ratio provides insight into the company's ability to meet its short-term obligations using the most liquid of its current assets.

Overall, Dominos Pizza Inc's liquidity ratios suggest that the company has generally maintained a healthy liquidity position over the past five years, with the current ratio typically above 1 and the cash ratio showing some variability. However, the decreasing trend in the quick ratio should be monitored as it may indicate a potential challenge in meeting short-term obligations without relying on inventory.

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Additional liquidity measure

Dominos Pizza Inc's cash conversion cycle has shown a consistent upward trend over the past five years, increasing from 11.63 days in 2019 to 19.95 days in 2023. This indicates that the company is taking longer to convert its investments in inventory and accounts receivable into cash. The prolonged cycle suggests potential inefficiencies in managing cash flow, inventory turnover, and collection of receivables. Dominos Pizza Inc may need to review its operational processes to streamline the cash conversion cycle and improve liquidity management in order to sustain long-term financial health.