FedEx Corporation (FDX)

Based on the data provided, let's analyze the liquidity ratios of FedEx Corporation:

1. Current Ratio:
- The current ratio measures a company's ability to cover its short-term liabilities with its current assets. The trend for FedEx's current ratio over the past five years shows a slight decline from 1.58 in 2020 to 1.36 in 2024.
- A current ratio above 1 indicates that FedEx has more current assets than current liabilities, reflecting a relatively healthy liquidity position. However, the decreasing trend suggests a potential need for closer monitoring of liquidity management.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. FedEx's quick ratio has also shown a decreasing trend from 3.17 in 2021 to 1.24 in 2024.
- A quick ratio above 1 indicates that FedEx can cover its short-term obligations without relying on selling inventory. While the quick ratio is generally lower than the current ratio, the declining trend may raise concerns about FedEx's ability to meet its immediate liabilities with liquid assets.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, focusing solely on the ability to cover short-term liabilities with cash and cash equivalents. Over the five-year period, FedEx's cash ratio has fluctuated, with a sharp decrease from 2.29 in 2021 to 0.49 in 2024.
- A cash ratio above 1 indicates that FedEx holds sufficient cash to meet short-term obligations. The declining trend in the cash ratio suggests a decreasing ability to cover immediate liabilities solely with cash holdings.

In summary, while FedEx Corporation maintains liquidity levels above the threshold of 1 for all three ratios, the declining trends in the current, quick, and cash ratios over the past five years indicate a potential need for enhanced liquidity management to ensure the company can meet its short-term obligations effectively.

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See also:

FedEx Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of FedEx Corporation has shown fluctuations over the past five years. In the most recent fiscal year ending on May 31, 2024, the company's cash conversion cycle was 18.28 days, indicating that it takes approximately 18.28 days for FedEx to convert its investments in inventory and accounts receivable into cash from its sales.

Compared to the previous year, there was an increase in the cash conversion cycle from 12.00 days to 18.28 days, suggesting that FedEx took longer to convert its operating assets into cash in the latest fiscal period.

Analyzing the trend over the five-year period, it is evident that the cash conversion cycle fluctuated, reaching its lowest point in May 31, 2023, at 12.00 days and highest in May 31, 2020, at 23.58 days. These fluctuations may be influenced by various factors such as changes in inventory management, receivables collection efficiency, and payment practices.

Overall, monitoring the cash conversion cycle is crucial for assessing FedEx's operational efficiency and liquidity management. A shorter cash conversion cycle generally indicates that the company is efficient in converting its investments into cash, while a longer cycle may signal potential liquidity challenges or inefficiencies in working capital management.