Ethan Allen Interiors Inc (ETD)

Ethan Allen Interiors Inc.'s liquidity position over the period from June 30, 2021, to June 30, 2025, demonstrates an overall improving trend, with variations reflecting shifts in the company's ability to meet its short-term obligations.

The current ratio, which measures the company’s capacity to cover its current liabilities with its total current assets, has shown consistent growth. It increased from 1.32 in 2021 to 1.61 in 2022, then further to 2.20 in 2023. Slight decreases occurred in subsequent years, with the ratio standing at 2.16 in 2024 and 2.03 in 2025. These figures suggest a strengthening liquidity buffer, particularly leading up to 2023, indicating improved short-term financial health and enhanced ability to meet current liabilities with existing assets.

The quick ratio, which excludes inventories from current assets to assess more liquid assets’ coverage of current liabilities, follows a similar positive trajectory. It rose from 0.56 in 2021 to 0.64 in 2022, then more significantly to 1.13 in 2023. The ratios in 2024 and 2025 are slightly lower at 1.09 and 0.93, respectively. The notable increase in 2023 reflects a greater proportion of liquid assets relative to current liabilities, although a slight decline thereafter suggests a modest reduction in liquidity intensity or a relative increase in short-term liabilities.

The cash ratio, representing the most conservative measure of liquidity, increased from 0.52 in 2021 to 0.56 in 2022 and then experienced a substantial increase to 1.06 in 2023. This peak indicates a strong cash position relative to short-term obligations during that year. The ratio remains high in 2024 at 1.05 but decreases to 0.89 in 2025, signaling a slight reduction in cash reserves relative to current liabilities, though still maintaining a relatively comfortable liquidity stance.

Overall, the company's liquidity ratios indicate a pattern of strengthening liquidity through 2023, with the most robust position observed in 2023 when all three ratios reached notably high levels. The slight declines thereafter suggest a modest normalization but still reflect adequate liquidity to meet short-term obligations. The trends illustrate a trajectory of improving solvency indicators culminating in a healthy liquidity profile, though ongoing monitoring is advisable to observe whether these levels are maintained or further improved.

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Additional liquidity measure

The analysis of Ethan Allen Interiors Inc’s cash conversion cycle (CCC) over the period from June 30, 2021, to June 30, 2025, reveals notable fluctuations and a general increasing trend. On June 30, 2021, the CCC stood at approximately 107.69 days, indicating a relatively shorter cycle during that year. By June 30, 2022, the cycle extended significantly to approximately 160.07 days, representing an increase of roughly 48.38 days. This suggests that the company experienced a slowdown in converting investments in inventory and receivables into cash, potentially due to extended inventory holding periods or longer receivables collection periods.

The subsequent year, June 30, 2023, showed a slight decrease to approximately 146.91 days, indicating some improvement in the cash conversion efficiency, although it remained elevated compared to 2021. However, the trend reversed and the cycle lengthened again by June 30, 2024, reaching approximately 169.11 days. This increase points to a possible deterioration in operational efficiency, with longer durations for inventory to be sold and receivables to be collected before cash realization.

The most recent data available as of June 30, 2025, shows an increase to approximately 182.33 days, continuing the upward trend. This extended cycle duration signifies potential growth in the time required to convert operational investments into cash, which could strain liquidity management and impact cash flows. The consistent elongation of the cash conversion cycle over this four-year period indicates an overall trend toward decreased operational efficiency or strategic shifts in inventory and receivables management, requiring further analysis to determine underlying causes and implications for financial health.