GameStop Corp (GME)

GameStop Corp's liquidity ratios, specifically the current ratio, quick ratio, and cash ratio, provide insight into the company's ability to meet its short-term obligations and manage its current assets effectively.

1. Current Ratio:
- The current ratio reflects GameStop's short-term liquidity position by comparing its current assets to current liabilities.
- Over the last few years, the current ratio has shown some fluctuations but generally remained above 1, indicating that GameStop has more current assets than current liabilities.
- Improvements in the current ratio from 2022 to 2024 suggest an increase in the company's ability to cover its short-term obligations with its current assets.
- However, the current ratio saw a significant spike in July 2024 and January 2025, indicating a potential influx of current assets relative to current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- GameStop's quick ratio has also shown variability over time but generally remained below 1, indicating that the company may have difficulty meeting its short-term obligations without relying on inventory.
- Similarly to the current ratio, the quick ratio experienced notable spikes in July 2024 and January 2025, suggesting an increase in immediate liquidity.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure as it assesses the company's ability to cover its short-term obligations using only cash and cash equivalents.
- GameStop's cash ratio aligns closely with the current and quick ratios, reflecting the company's capacity to meet short-term liabilities with available cash.
- The sharp increase in the cash ratio in July 2024 and January 2025 indicates a significant rise in cash and equivalents compared to short-term obligations, signifying strong liquidity in those periods.

Overall, GameStop Corp's liquidity ratios suggest that the company has generally maintained a solid ability to meet its short-term financial commitments. However, the significant spikes in the ratios in July 2024 and January 2025 may require further investigation to understand the reasons behind the substantial increases in liquidity during those periods.

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See also:

GameStop Corp Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The cash conversion cycle is a vital liquidity and efficiency metric that reflects how efficiently a company manages its working capital. For GameStop Corp, analyzing the cash conversion cycle from January 31, 2022, to January 31, 2025, reveals fluctuations in the number of days it takes for the company to convert its investments in inventory and accounts receivable into cash.

GameStop's cash conversion cycle fluctuated significantly over the observed period, ranging from a low of 19.98 days in April 29, 2023, to a high of 118.07 days in October 31, 2022. The company showed improvements in cash conversion efficiency through decreasing cycles in some periods, such as October 29, 2022 (33.53 days), January 28, 2023 (22.46 days), and April 29, 2023 (19.98 days).

However, there were also instances where the cash conversion cycle increased notably, such as October 31, 2022 (118.07 days), October 31, 2023 (112.66 days), and October 31, 2024 (95.76 days). These longer cycles can indicate potential inefficiencies in managing inventory, collecting receivables, or paying suppliers.

Moreover, variations in the cash conversion cycle can be influenced by factors like seasonality, industry trends, operational changes, or market conditions. Analyzing this metric over time can help stakeholders assess GameStop's working capital management effectiveness and identify areas for improvement to optimize cash flow and overall financial performance.