Ethan Allen Interiors Inc (ETD)

Liquidity ratios

Jun 30, 2025 Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020
Current ratio 2.03 2.29 2.11 1.99 2.16 2.09 2.31 2.14 2.20 2.02 1.93 1.69 1.61 1.48 1.42 1.29 1.32 1.29 1.31 1.24
Quick ratio 0.54 1.14 0.96 0.91 1.09 0.99 1.13 1.06 1.13 0.99 0.86 0.73 0.64 0.50 0.51 0.44 0.51 0.53 0.47 0.40
Cash ratio 0.50 1.10 0.93 0.86 1.05 0.94 1.08 0.99 1.06 0.90 0.80 0.68 0.56 0.45 0.47 0.40 0.47 0.48 0.43 0.33

The liquidity position of Ethan Allen Interiors Inc. has demonstrated a consistent and generally improving trend over the period from September 2020 to June 2025, as reflected across key liquidity ratios: the current ratio, quick ratio, and cash ratio.

Current Ratio Analysis:
The current ratio has steadily increased from 1.24 in September 2020 to a peak of 2.31 in December 2023, indicating an enhancement in the company's short-term liquidity and its ability to meet current obligations. This ratio remained comfortably above 1.0 throughout the period, suggesting that current assets consistently exceeded current liabilities. Post-2023, the ratio experienced a slight decline but remained above 2.0, staying within a healthy range, signaling continued liquidity sufficiency.

Quick Ratio Analysis:
The quick ratio, which excludes inventory from current assets to assess immediate liquidity, also exhibited growth over time. Starting from 0.40 in September 2020, it increased progressively, reaching a high of approximately 1.14 in March 2025. This indicates an improved capacity to cover immediate liabilities with liquid assets, implying effective management in converting assets to cash as needed. The quick ratio's trend aligns with the current ratio's pattern, though it remains more conservative in evaluating liquidity.

Cash Ratio Analysis:
The cash ratio, representing the most liquid assets (cash and cash equivalents) relative to current liabilities, showed a marked upward trajectory. Beginning at 0.33 in September 2020, it climbed steadily, reaching over 1.10 by March 2025. This suggests a substantial increase in cash holdings relative to short-term liabilities, reinforcing the company's strong liquidity position. However, some fluctuation is observed; notably, the ratio decreased to 0.50 in June 2025, potentially indicating a temporary reduction in cash reserves or increased short-term liabilities, but it still remains above the levels seen at the start of the period.

Summary:
Overall, Ethan Allen Interiors Inc. has demonstrated significant improvement in liquidity over the analyzed period. The rising current and quick ratios suggest enhanced capacity to meet short-term obligations with both total and liquid assets. The cash ratio's improvement underscores an accumulation of readily available cash, bolstering liquidity resilience. The ratios collectively indicate a robust liquidity profile, with prudent asset management and a focus on maintaining or increasing cash and liquid assets to support operational flexibility and financial stability.


Additional liquidity measure

Jun 30, 2025 Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020
Cash conversion cycle days 215.64 228.80 213.75 173.21 168.97 172.88 157.34 156.55 146.91 141.72 144.31 142.26 160.07 169.86 154.17 152.86 107.69 106.17 109.34 108.63

The analysis of Ethan Allen Interiors Inc.'s cash conversion cycle (CCC) over the specified periods indicates trends and shifts in operational efficiency related to working capital management.

Initially, from September 30, 2020, to June 30, 2021, the CCC remained relatively stable, fluctuating narrowly between approximately 108.63 days and 107.69 days, suggesting a consistent pattern of receivables collection, inventory management, and payable policies during this period.

However, starting in September 2021, there was a notable and sustained increase in the CCC, rising sharply to 152.86 days by September 30, 2021, and continuing to grow through subsequent quarters, reaching 154.17 days at the end of 2021. This upward trend accelerated further in the first quarter of 2022, peaking at 169.86 days, and remained elevated through mid-2022, with a high of 160.07 days at June 30, 2022, before gradually decreasing to approximately 142.26 days by September 2022.

From late 2022 onward, the CCC demonstrated a steady upward trajectory again, attaining 157.34 days at December 2023—approximately a 35-day increase from the beginning of 2022—indicating lengthened periods of cash tied up in inventories and receivables relative to payables. This trend continued into 2024 and 2025, with the cycle reaching as high as 228.80 days on March 31, 2025.

The significant expansion in the CCC over time signifies a deterioration in the company's working capital efficiency, implying the company is taking longer to convert its investments in inventory and receivables into cash. The trend indicates possible challenges such as extended inventory holding periods, slowing receivable collections, or shifts in payment terms with suppliers, which cumulatively have led to increased liquidity tied-up duration.

Overall, the prolonged and increasing cash conversion cycle suggests a need for closer management of operational processes to restore efficiency, reduce cash tied-up, and improve liquidity.