ELF Beauty Inc (ELF)

ELF Beauty Inc's liquidity ratios indicate how well the company can meet its short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to pay off its current liabilities using its current assets.
- The trend for ELF Beauty Inc's current ratio shows a generally healthy position over the years, ranging from 2.32 to 2.97, with a slight dip to 1.59 in March 31, 2024.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, providing some cushion for meeting its short-term obligations.
- ELF Beauty Inc's current ratio seems to be fluctuating and should be closely monitored to ensure it remains at an adequate level.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets.
- ELF Beauty Inc's quick ratio has generally been stable, with values ranging from 1.37 to 1.75, except for a significant drop to 0.78 in March 31, 2024.
- A quick ratio above 1 indicates that the company can cover its current liabilities with its most liquid assets, excluding inventory.
- The dip in the quick ratio in March 31, 2024, raises concerns about the company's ability to meet short-term obligations without relying on inventory liquidity.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, focusing solely on the company's ability to cover current liabilities with its cash and cash equivalents.
- ELF Beauty Inc's cash ratio has varied, ranging from 0.36 to 1.12, with a notable dip in March 31, 2024.
- A cash ratio above 1 implies that the company can settle its short-term obligations using only cash and cash equivalents, indicating a strong liquidity position.
- The significant decrease in the cash ratio in March 31, 2024, suggests a lower level of cash or cash equivalents available to cover immediate obligations.

In conclusion, while ELF Beauty Inc has maintained sound liquidity ratios overall, the fluctuations in these ratios, especially in March 31, 2024, indicate the importance of continuous monitoring to ensure the company's ability to meet short-term obligations effectively.

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See also:

ELF Beauty Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of ELF Beauty Inc has shown fluctuations over the past five years. As of March 31, 2021, the company's cash conversion cycle was 180.19 days, indicating that it took 180.19 days on average to convert its investments in raw materials into cash from sales. By March 31, 2022, the cycle extended to 212.07 days, suggesting a longer period between paying for production inputs and receiving cash from sales.

However, there was a significant improvement in the efficiency of the cash conversion cycle by March 31, 2023, where it reduced to 139.48 days. This improvement signifies that ELF Beauty Inc was able to streamline its operations and convert its investments into cash more swiftly.

By March 31, 2024, the cash conversion cycle slightly increased to 178.54 days, indicating a longer time to convert investments into cash compared to the previous year. Notably, by March 31, 2025, the cash conversion cycle dropped to 0.00 days, which is an unconventional result and could be attributed to data reporting or calculation issues.

Overall, monitoring the cash conversion cycle is crucial for understanding how efficiently ELF Beauty Inc manages its working capital and operations. Variations in the cycle can highlight changes in the company's liquidity, inventory management, and sales collection processes.