Floor & Decor Holdings Inc (FND)

Floor & Decor Holdings Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio shows a general decreasing trend over the years, from 1.49 in 2020 to 1.20 in 2024. This trend suggests a slight weakening in the company's ability to cover its current liabilities with its current assets.
- While a current ratio above 1 indicates that the company has more current assets than current liabilities, the downward trend may raise concerns about the company's liquidity position.

2. Quick Ratio:
- The quick ratio, which measures the company's ability to cover its short-term obligations without relying on inventory, exhibits a significant decline from 0.44 in 2020 to 0.15 in 2024.
- A quick ratio below 1 indicates that the company may struggle to meet its immediate liabilities without relying on inventory liquidation or additional financing.

3. Cash Ratio:
- The cash ratio, which focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents, shows a performance similar to the quick ratio.
- Similarly to the quick ratio, the declining trend in the cash ratio from 0.44 in 2020 to 0.15 in 2024 may indicate potential liquidity challenges for Floor & Decor Holdings Inc in the near term.

Overall, the decreasing trend in all three liquidity ratios suggests that Floor & Decor Holdings Inc may face increasing liquidity pressure as time progresses. It would be prudent for the company to closely monitor its liquidity position and take appropriate measures to improve its short-term financial stability.

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Additional liquidity measure

Floor & Decor Holdings Inc's cash conversion cycle has shown some fluctuations over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

On December 31, 2020, the cash conversion cycle stood at 171.62 days, indicating that it took the company approximately 171 days to convert its investments into cash. This number increased to 182.96 days by December 31, 2021, and further to 185.95 days by December 31, 2022, suggesting a lengthening of the cycle.

However, there was a significant improvement in the cash conversion cycle by December 31, 2023, where it decreased to 157.99 days, indicating the company became more efficient in converting investments into cash. Subsequently, on December 31, 2024, the cycle improved further to 163.56 days.

Overall, the trend in the cash conversion cycle has been somewhat volatile with fluctuations observed throughout the years. It is essential for the company to closely monitor and manage this cycle to ensure optimal cash flow efficiency and operational performance.