Frontdoor Inc (FTDR)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.10 | 0.91 | 0.78 | 1.55 | 1.27 |
| Quick ratio | 1.00 | 0.83 | 0.71 | 1.49 | 1.23 |
| Cash ratio | 0.98 | 0.82 | 0.69 | 1.48 | 1.20 |
Frontdoor Inc.'s liquidity ratios provide insight into its ability to meet short-term obligations. The current ratio, which measures the company's ability to cover current liabilities with current assets, shows a fluctuating trend over the past five years. The ratio was 1.10 in 2023, indicating that the company had $1.10 in current assets for every $1 in current liabilities. This is an improvement compared to 2022 and 2021, where the ratios were below 1.0, suggesting potential liquidity concerns. In 2020 and 2019, the current ratio was healthier, indicating a stronger ability to meet short-term obligations.
Similarly, the quick ratio, which excludes inventory from current assets, reflects Frontdoor Inc.'s immediate liquidity position. The company's quick ratio mirrors the trend of the current ratio, indicating an improvement from 2021 and 2022 but still below the positive levels seen in 2020 and 2019.
The cash ratio, which is the most stringent measure of liquidity, focuses solely on cash and cash equivalents to cover current liabilities. Frontdoor Inc.'s cash ratio shows similar fluctuations, yet it remains relatively stable over the years.
Overall, while there has been some improvement in Frontdoor Inc.'s liquidity ratios in 2023 compared to the prior two years, the company should continue to monitor and manage its liquidity position to ensure it can meet its short-term obligations effectively.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -29.76 | -29.57 | -16.70 | -25.25 | -14.06 |
The cash conversion cycle of Frontdoor Inc. has shown a consistent trend of improvement over the past five years. The company's cash conversion cycle, which measures the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales, decreased from -22.56 days in 2019 to -29.76 days in 2023.
A negative cash conversion cycle indicates that Frontdoor Inc. is efficiently managing its working capital, as it is able to collect cash from sales before needing to pay suppliers for inventory. The decreasing trend in the cash conversion cycle suggests that the company has been able to optimize its inventory management, accounts receivable collection, and accounts payable payment processes over the years.
Overall, Frontdoor Inc.'s ability to convert its investments into cash quickly has been improving, which is a positive sign of effective working capital management and liquidity for the company.