Brinker International Inc (EAT)

The liquidity position of Brinker International Inc. over the period from December 2020 through June 2025 demonstrates a generally constrained ability to meet short-term obligations through its current assets. The current ratio, which measures the company's capacity to cover its current liabilities with current assets, exhibits a declining trend overall. At the start of the period in December 2020, the ratio stood at 0.51, indicating that current assets were roughly half of current liabilities. Throughout the subsequent quarters, this ratio experienced fluctuations but remained below 0.5 for most of the period, reaching a low of approximately 0.30 in March 2024 before showing a slight recovery to 0.38 in June 2024 and settling around 0.31 by June 2025. This persistent below-1 ratio suggests that the company consistently faced liquidity challenges, with current liabilities exceeding current assets.

The quick ratio, which excludes inventory to assess the company's ability to pay short-term obligations using its most liquid assets, follows a similar declining trend. Beginning at approximately 0.34 in December 2020, the quick ratio generally declined over time and fell below 0.2 during most of 2022 and 2023. The ratio fluctuated slightly but remained low, with the lowest recorded at approximately 0.00 in June 2025. This indicates a significant reduction in highly liquid assets relative to current liabilities.

The cash ratio, representing the most conservative measure of liquidity by considering only cash and cash equivalents, also reflects tight liquidity conditions. Initially at 0.12 in December 2020, the cash ratio declined further, reaching as low as 0.02 in several quarters in 2022 and 2023. There was a modest uptick to 0.10 in June 2024, but it reverted to near-zero levels by June 2025, implying very limited immediate cash resources to cover current obligations.

In summary, across all three measures—current ratio, quick ratio, and cash ratio—Brinker International Inc. has consistently exhibited low liquidity ratios throughout the observed period. This pattern indicates ongoing liquidity constraints, with the company typically unable to cover its short-term liabilities fully with its most liquid assets. The ratios' trend reflects potential liquidity risk and the importance of evaluating the company’s ability to generate cash flow and manage working capital more effectively.

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Additional liquidity measure

The analysis of Brinker International Inc.'s cash conversion cycle (CCC) over the respective periods reveals significant fluctuations and periods of both positive and negative values, indicating varying operational efficiencies and liquidity management strategies.

Initially, at the end of December 2020, the CCC was recorded at -1.68 days, indicating that the company was able to collect cash from sales and settle its payables slightly faster than the inventory acquisition and sales cycle, effectively operating with immediate or rapid cash flow conversion. Throughout 2021, the CCC shifted to positive territory, with values such as 9.05 days and 4.92 days in December 2020 and March 2021 respectively, reflecting longer periods between cash outflows and inflows, perhaps due to extended receivables or inventory turnover patterns during that period.

Subsequent quarters in 2021 depicted a trend towards stabilization, with the CCC gradually decreasing from 9.05 days in December 2020 to 6.25 days at year-end, and further to 1.55 days by March 2022. This suggests an improvement in operational efficiency, with shorter cycles generally indicative of better receivables collection, inventory management, or both.

Throughout 2022, the CCC continued to hover near or below zero, with values such as 2.09 days and 0.17 days, and even slightly negative at the end of September 2022 (-0.99 days). The near-zero and negative figures imply that the company's cash inflows from sales tend to precede or coincide closely with its outflows for inventory and payables, reflecting efficient working capital management.

In 2023, the trend of negative CCC persists with some fluctuations: -0.92 days in March 2023, 1.80 days in June 2023, and -0.99 days in September 2023, indicating that the company consistently tends to collect cash faster than it pays its suppliers. The CCC moves into positive territory again at the end of December 2023 with 0.92 days but reverts to negative in 2024, with values as low as -5.73 days in March 2025, suggesting an even more accelerated cash collection cycle relative to payables and inventory turnover.

Overall, the data suggests that Brinker International has been increasingly performing with a cash conversion cycle close to or below zero for an extended period, especially from late 2021 onwards. Negative or near-zero CCCs are typically characteristic of efficient liquidity management, allowing the firm to generate cash faster than it disburses it for operational needs. The notable shifts and fluctuations may reflect changes in operational policies, seasonal factors, or strategic adjustments in supplier or inventory management. Persistent negative values, particularly the extreme -5.73 days observed in March 2025, demonstrate a strong cash inflow advantage over outgoing payments, which could augment liquidity and reduce financing costs, assuming consistent operational execution.