Estee Lauder Companies Inc (EL)

The analysis of Estee Lauder Companies Inc.'s liquidity ratios over the period from September 2020 to June 2025 reveals several trends and nuances in the company’s short-term financial health.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, shows a generally declining trend over the analyzed period. Starting at 1.85 in September 2020, it peaks at 2.12 in March 2021 before gradually decreasing to approximately 1.30 by June 2025. Despite this decline, the current ratio consistently remains above 1. indicating that the company has historically maintained sufficient current assets to cover its current liabilities. The period after March 2021 exhibits a steady downward trajectory, suggesting a potential softening in liquidity position, although it still retains a comfortable margin above the critical threshold of 1.

The quick ratio, which excludes inventory from current assets to provide a more stringent measure of immediate liquidity, exhibits more variability but follows a similar declining trend. It peaks at 1.57 in March 2021, then generally diminishes to around 0.82 by June 2025. This decline indicates a decreasing proportion of liquid assets readily available to meet short-term liabilities without relying on inventory sales. The quick ratio generally remains close to or slightly below 1 in recent periods, highlighting a cautious liquidity position, but still indicating the company's capacity to meet immediate obligations with its most liquid assets.

The cash ratio, representing the most conservative measure by focusing solely on cash and cash equivalents, also reflects a declining pattern. From a high of 1.23 in March 2021, it declines to approximately 0.54 by June 2025. Although this ratio remains below 1 in recent periods, it has remained above 0.5, indicating that the company maintains a modest proportion of cash resources sufficient to meet some of its immediate short-term liabilities. The fluctuations within this period suggest varying cash management strategies, but overall point to a cautious liquidity stance.

In summary, there is a clear downward trend across all three liquidity ratios over the period examined. While the ratios remain above critical thresholds, implying that the company has historically maintained an adequate liquidity buffer, the decreasing trends suggest an increasingly conservative liquidity position. This evolution warrants attention as it may reflect strategic shifts in asset management or evolving short-term financing considerations, emphasizing the importance of monitoring the company's ability to sustain liquidity in future periods.

---

See also:

Estee Lauder Companies Inc Liquidity Ratios (Quarterly Data)

---

Additional liquidity measure

The analysis of Estee Lauder Companies Inc.'s cash conversion cycle (CCC) over the specified period reveals notable fluctuations and a general trend toward reduction in cycle length. Initially, the CCC was at 155.33 days as of September 30, 2020. This period experienced a decline, reaching its lowest point of approximately 95.46 days by June 30, 2025, indicating improvements in the company's working capital management and operational efficiency.

Throughout the observed timeline, several periods demonstrate significant variability. For example, the CCC increased sharply from 115.71 days on June 30, 2021, to a peak of 184.51 days on September 30, 2022, suggesting a slowdown in cash conversion efficiency during that interval. This increase may reflect longer inventory holding periods, extended receivables collection times, or delays in accounts payable payments, impacting overall liquidity.

Conversely, subsequent periods show a consistent downward trend, with notable reductions such as from 173.69 days on March 31, 2023, to 101.03 days on June 30, 2024. These decreases imply enhanced inventory management, faster receivables collection, or optimized payables, collectively improving cash flow cycles.

Overall, the data points to a pattern of cyclical fluctuations with an overarching trajectory toward shorter cash conversion cycles over the analyzed period. This trend suggests that the company has been progressively improving its management of working capital components, thereby increasing operational efficiency and liquidity management effectiveness.