Five Below Inc (FIVE)

The liquidity ratios of Five Below Inc over the past five years indicate the company's ability to meet its short-term obligations and the level of its cash availability.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has ranged from 1.54 to 1.89 over the past five years. A current ratio above 1 indicates that Five Below Inc has more current assets than current liabilities, with the most recent ratio of 1.68 suggesting that the company may have a slightly lower level of liquidity compared to previous years.

The quick ratio, also known as the acid-test ratio, provides a stricter measure of liquidity by excluding inventory from current assets. Five Below Inc's quick ratio has ranged from 0.58 to 0.94 over the past five years, indicating a downward trend in the company's ability to meet its short-term obligations with its most liquid assets. The latest quick ratio of 0.64 suggests that the company's liquidity position may have weakened compared to the previous year.

The cash ratio, which is the strictest measure of liquidity as it only considers cash and cash equivalents, has remained consistent at 0.64 over the past three years, indicating that Five Below Inc may have maintained a stable level of cash to cover its short-term liabilities.

Overall, while Five Below Inc has shown adequate liquidity levels based on the current ratio, the decreasing trend in the quick ratio raises some concerns about the company's ability to meet its short-term obligations with its most liquid assets. Management should closely monitor liquidity levels and cash management strategies to ensure the company's financial health in the future.

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Additional liquidity measure

The cash conversion cycle of Five Below Inc has shown fluctuations over the past five years. In the latest fiscal year ending on February 3, 2024, the company's cash conversion cycle stood at 37.55 days, a slight improvement from the previous year. This metric indicates that it takes Five Below approximately 37.55 days to convert its investments in inventory and other resources into cash from sales.

Compared to the prior years, Five Below managed its cash conversion cycle relatively efficiently in both fiscal 2022 and fiscal 2021, with figures of 36.68 days and 27.61 days, respectively. The notable decrease in the cash conversion cycle in fiscal 2021 suggests the company was able to improve its management of inventory, accounts receivable, and accounts payable, leading to a quicker conversion of resources into cash.

However, in fiscal 2023 and fiscal 2020, the cash conversion cycles were longer at 39.30 days and 41.76 days, respectively, indicating potential inefficiencies in working capital management during those years.

Overall, analyzing the trend in Five Below's cash conversion cycle can provide insights into the company's operational efficiency and effectiveness in managing its liquidity and working capital. Further investigation into the drivers behind these fluctuations would be beneficial for a deeper understanding of the company's financial performance.