Foot Locker Inc (FL)

The liquidity ratios of Foot Locker Inc show the company's ability to meet its short-term obligations and financial flexibility.

1. Current Ratio: This ratio indicates Foot Locker's ability to cover its short-term liabilities with its current assets. The current ratio has remained relatively stable, ranging from 1.57 to 1.72 over the past few years. A current ratio above 1 suggests that Foot Locker has sufficient current assets to meet its current liabilities.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Foot Locker's quick ratio has fluctuated between 0.19 and 0.35, indicating a lower level of liquidity compared to the current ratio. A quick ratio below 1 may suggest potential difficulties in meeting short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio measures Foot Locker's ability to cover its current liabilities with cash and cash equivalents alone. The cash ratio has varied between 0.19 and 0.33, with the company having a lower proportion of cash compared to current assets. A higher cash ratio is generally preferred as it indicates a stronger ability to address immediate financial needs without relying on other current assets.

In summary, Foot Locker Inc's liquidity ratios demonstrate that while the company has generally maintained a sufficient level of current assets to cover its short-term obligations, there are fluctuations in the quick ratio and cash ratio that may warrant further monitoring to ensure adequate liquidity management.

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Additional liquidity measure

The cash conversion cycle of Foot Locker Inc has fluctuated over the years, showing variations in the efficiency of their working capital management.

On January 28, 2023, the cash conversion cycle was 58.30 days, indicating a relatively efficient cycle. This improved to 59.09 days by February 3, 2024, reflecting a further enhancement in working capital management.

In contrast, on January 31, 2023, the cash conversion cycle significantly increased to 100.70 days, implying a longer period for Foot Locker to convert its investments in inventory back to cash. However, this was partially mitigated as by January 31, 2024, the cycle had decreased to 93.43 days.

Despite the improvement seen by early 2024, the cycle extended once again to 98.24 days by January 31, 2025, indicating a potential challenge in efficiently managing working capital.

Overall, Foot Locker Inc should focus on sustaining the improvements achieved in its cash conversion cycle, as efficiency in working capital management is key to optimizing cash flow and financial performance.