H&R Block Inc (HRB)

Based on the liquidity ratios of H&R Block Inc provided in the table, we can observe the following trends:

1. Current Ratio: The current ratio measures the firm's ability to pay off its short-term obligations with its current assets. H&R Block's current ratio has been gradually decreasing over the past five years, from 1.96 in April 2020 to 1.27 in June 2024. This suggests that the company may have a decreasing ability to cover its short-term liabilities with its current assets.

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. H&R Block's quick ratio has fluctuated over the past five years but has shown a general downward trend, from 1.78 in April 2020 to 1.15 in June 2024. This indicates a potential decrease in the company's ability to meet its short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio is the most conservative liquidity ratio as it only considers cash and cash equivalents to cover current liabilities. H&R Block's cash ratio has also displayed a decreasing trend over the five-year period, declining from 1.70 in April 2020 to 1.08 in June 2024. This suggests that the company's ability to cover its short-term obligations solely with cash has been reducing over time.

Overall, the liquidity ratios of H&R Block Inc indicate a declining trend in the company's ability to meet its short-term obligations with its current assets, excluding inventory, and solely with cash. It is essential for investors and stakeholders to monitor these ratios closely as they provide insights into the company's financial health and liquidity position.

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Additional liquidity measure

The cash conversion cycle of H&R Block Inc has shown fluctuation over the past five years. In the most recent period as of June 30, 2024, the company had a cash conversion cycle of 7.14 days, indicating an improvement in efficiency compared to the previous year. This suggests that the company is managing its cash, accounts receivable, and inventory more effectively.

In contrast, in April 30, 2021, and April 30, 2020, the cash conversion cycle was significantly longer at 21.83 days and 19.11 days, respectively. This may indicate that H&R Block Inc faced challenges in managing its working capital efficiently during those periods.

Overall, a lower cash conversion cycle is generally preferred as it signifies that the company is able to convert its investments in inventory and accounts receivable back into cash more quickly. H&R Block Inc should continue to focus on optimizing its cash conversion cycle to ensure efficient working capital management and improve its overall financial health.