Frontdoor Inc (FTDR)

Frontdoor Inc's liquidity ratios have shown some fluctuations over the years.

The current ratio, a measure of the company's ability to cover its short-term liabilities with its current assets, declined from 1.55 in 2020 to 0.78 in 2021, indicating a potential liquidity concern. However, there has been an improvement since then, with the ratio increasing to 1.32 by the end of 2024, which suggests that the company may be in a better position to meet its short-term obligations.

The quick ratio, which provides a more stringent assessment of liquidity by excluding inventory from current assets, followed a similar trend. It decreased from 1.48 in 2020 to 0.69 in 2021 but steadily improved to 1.18 by the end of 2024. This indicates a better ability to pay off current liabilities without relying on the sale of inventory.

The cash ratio, representing the company's most liquid assets relative to its current liabilities, also displayed a similar pattern of decline in 2021 followed by a recovery in subsequent years. The ratio stood at 1.18 by the end of 2024, suggesting that Frontdoor Inc has a sufficient level of cash to cover its short-term obligations.

Overall, while there were some concerns about liquidity in 2021, Frontdoor Inc has made progress in improving its liquidity position in the following years. It is important for the company to continue monitoring these ratios to ensure a healthy liquidity position for future operations and growth.

---

Additional liquidity measure

Frontdoor Inc's cash conversion cycle is a metric that measures how efficiently the company manages its cash flow from the acquisition of inventory to the collection of receivables. In 2020, the company achieved a cash conversion cycle of 0.00 days, indicating that it was able to convert its investments in inventory and receivables into cash almost immediately. However, in 2021, the cash conversion cycle increased to 10.70 days, suggesting that the company took longer to convert its investments into cash that year.

Subsequently, from 2022 to 2024, Frontdoor Inc improved its cash conversion cycle back to 0.00 days, signaling a return to more efficient cash management. Overall, fluctuations in the cash conversion cycle can reflect changes in inventory management, payment terms with customers, and collection efficiency. It is essential for the company to monitor and optimize its cash conversion cycle to ensure effective working capital management and liquidity.