Ethan Allen Interiors Inc (ETD)

The liquidity ratios of Ethan Allen Interiors Inc over the past five years show a mixed trend in terms of the company's ability to meet its short-term financial obligations.

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Ethan Allen Interiors Inc's current ratio has fluctuated over the past five years, ranging from 1.32 to 2.20. Generally, a current ratio above 1 indicates that the company has more current assets than current liabilities, which is positive. The current ratio for the most recent year (2.16) indicates a healthy position, with the company having more than twice the current assets to cover its current liabilities.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Ethan Allen Interiors Inc's quick ratio has also varied over the years, ranging from 0.51 to 1.13. A quick ratio above 1 signifies that the company can meet its short-term obligations without relying on inventory sales. The quick ratio for the latest year (1.09) suggests that the company has adequate liquid assets to cover its short-term liabilities.

3. Cash Ratio:
The cash ratio is the most stringent liquidity measure, focusing only on a company's ability to cover its current liabilities with cash and cash equivalents. Ethan Allen Interiors Inc's cash ratio has shown improvement over the years, increasing from 0.47 in 2021 to 1.05 in 2024. A cash ratio above 1 indicates that the company holds sufficient cash to settle its short-term debt obligations. The cash ratio for the latest year (1.05) reflects a strong ability to meet immediate financial commitments with cash on hand.

In conclusion, Ethan Allen Interiors Inc's liquidity ratios have demonstrated overall improvement in recent years, with the company showing a healthier ability to meet its short-term obligations, especially in terms of cash reserves. However, continued monitoring of liquidity ratios is essential to ensure the company's ongoing financial health and stability.

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Additional liquidity measure

The cash conversion cycle of Ethan Allen Interiors Inc has shown variability over the past five years. In June 2024, the cash conversion cycle increased to 95.00 days from 88.01 days in June 2023. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash during the most recent period.

Comparing to previous years, the cash conversion cycle was relatively lower in June 2023 at 88.01 days and June 2021 at 91.52 days. This implies that the company managed its cash conversion more efficiently during those periods. However, in June 2022 and June 2020, the cash conversion cycle was higher at 102.32 days and 177.58 days respectively, indicating potential challenges in managing working capital during those years.

Overall, the analysis of the cash conversion cycle highlights the need for Ethan Allen Interiors Inc to focus on improving efficiency in managing its inventory, receivables, and payables to shorten the cycle and enhance its overall cash flow management.