Floor & Decor Holdings Inc (FND)

Floor & Decor Holdings Inc's liquidity ratios show fluctuations over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has shown a downward trend from 1.49 in 2020 to 1.14 in 2023, indicating a potential decrease in liquidity over time. A ratio above 1 suggests that the company can meet its current obligations.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown variability, ranging from 0.02 in 2022 to 0.44 in 2020. A quick ratio below 1 may indicate a potential inability to cover immediate liabilities without selling inventory, which can be a cause for concern.

The cash ratio, which is the most conservative liquidity metric as it only considers cash and cash equivalents, has fluctuated considerably, with values ranging from 0.01 in 2022 to 0.44 in 2020. A low cash ratio may indicate a reliance on non-cash assets to meet short-term obligations.

Overall, while the current ratio suggests that Floor & Decor Holdings Inc has generally been able to meet its short-term obligations, the quick ratio and cash ratio fluctuate significantly, indicating potential challenges in meeting immediate liabilities without relying on inventory or non-cash assets. Further analysis would be needed to understand the underlying reasons for these fluctuations and their potential impact on the company's financial stability.

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Additional liquidity measure

Floor & Decor Holdings Inc's cash conversion cycle has fluctuated over the past five years. In 2023, the company's cash conversion cycle decreased significantly to 37.72 days from 62.75 days in 2022 and 38.69 days in 2021. This reduction suggests that the company has improved its efficiency in converting its investments in inventory and accounts receivable into cash.

Comparing the 2023 figure with that of 2020 and 2019, where the cash conversion cycle was 36.39 days and 38.96 days respectively, we can see that the company's performance in managing its working capital has been relatively stable in recent years.

Despite the improvement in 2023, it is important for Floor & Decor Holdings Inc to continue monitoring and managing its cash conversion cycle effectively to ensure optimal utilization of its resources and maintain a healthy cash flow position.