Hanesbrands Inc (HBI)

Hanesbrands Inc's liquidity ratios provide insights into the company's ability to meet its short-term financial obligations.

The current ratio, which measures the ability to cover current liabilities with current assets, has shown a slight downward trend over the past five years. Although the current ratio decreased from 1.82 in 2019 to 1.64 in 2023, it remained above 1, indicating that the company has sufficient current assets to cover its current liabilities. However, there has been a slight decline in liquidity over the years.

The quick ratio, or acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Hanesbrands Inc's quick ratio has fluctuated over the years but remained below 1 in all the years presented. This suggests that the company may have difficulty meeting its short-term obligations without relying on selling off inventory. The decreasing trend from 0.65 in 2019 to 0.55 in 2023 indicates a potential deterioration in the company's ability to cover immediate liabilities with its most liquid assets.

The cash ratio, indicating the proportion of current liabilities that can be covered by cash and cash equivalents, has exhibited variability but generally remained low over the years. This suggests that Hanesbrands Inc may have limited cash resources to cover its obligations and may rely more on other current assets to meet short-term needs. The declining trend from 0.19 in 2019 to 0.15 in 2023 indicates a decreasing ability to cover current liabilities solely from cash on hand.

In conclusion, while Hanesbrands Inc has generally maintained a current ratio above 1, indicating a certain level of liquidity, the downward trends in the quick ratio and cash ratio suggest a potential weakening in the company's ability to cover its short-term obligations with its most liquid assets. Continued monitoring of liquidity management will be important for the company to ensure financial stability and operational efficiency.

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Additional liquidity measure

The cash conversion cycle of Hanesbrands Inc has displayed varying trends over the past five years. In 2023, the company was able to convert its inventory and accounts receivable into cash more efficiently compared to the previous year, as evidenced by a decrease in the cash conversion cycle to 78.34 days from 108.61 days in 2022. This suggests a potential improvement in the management of working capital.

Furthermore, in comparison to 2021 and 2020 when the cash conversion cycle was at 69.84 days and 73.80 days respectively, the increase in 2022 might have indicated a less efficient utilization of resources or a slowdown in the collection of receivables. However, it is worth noting that the 2023 figure is still higher than the 2021 and 2020 levels, indicating that there is room for further enhancement in the efficiency of cash conversion.

Moreover, looking back at 2019, the cash conversion cycle was notably higher at 98.01 days compared to the latest recorded figure. This indicates that Hanesbrands Inc has made progress in streamlining its cash conversion cycle over the past few years, which could be reflective of improved inventory management or better collection practices.

Overall, while the cash conversion cycle of Hanesbrands Inc has shown fluctuations over the years, the recent decrease in 2023 suggests a positive trend towards more efficient working capital management. Further analysis and monitoring of this metric can provide insights into the company's operational efficiency and financial performance.