Korn Ferry (KFY)

The liquidity ratios of Korn Ferry over the specified periods reveal several important trends and insights into the company's short-term financial health.

Current Ratio Analysis:
The current ratio has generally remained above 1.9 from April 2020 through October 2022, indicating that the company's current assets consistently exceeded current liabilities, thus suggesting adequate liquidity during this period. Notably, there was a decline in the current ratio beginning in early 2023, dropping below 2.0 at certain points, and a significant deviation appears in July 2023 where the ratio entered negative territory (-0.84). This anomaly likely indicates a temporary or extraordinary circumstance affecting current liabilities or assets, but subsequently, the ratio improved, reaching 2.07 by October 2024 and stabilizing around 1.83 in early 2025. The overall trend shows periods of fluctuation but a return to a generally healthy level of liquidity by the most recent period.

Quick Ratio Analysis:
The quick ratio, which excludes inventory and other less liquid assets, generally maintains a level above 1.6 through October 2022, signifying a strong ability to meet short-term obligations with liquid assets. A notable decline occurs in July 2023 when it drops sharply to 0.20, indicating a potential liquidity concern or an unusual accounting adjustment during that period. Following this, the ratio rebounds above 1.7 by October 2023 and remains stable around 1.7 to 1.97 through the subsequent periods, suggesting improved liquidity and a better capacity to settle immediate liabilities without reliance on inventories.

Cash Ratio Analysis:
The cash ratio, representing the most liquid assets (cash and cash equivalents) relative to current liabilities, remains relatively stable above 1.0 during most periods, indicating sufficient immediate liquidity. There is a dip in July 2023 where it turns negative (-0.80), aligning with the anomaly seen in other ratios, implying either a temporary cash management issue or a reporting anomaly. Post this period, the cash ratio recovers to above 0.85, reaching approximately 1.02 to 1.05 in the latest periods, reflecting a relatively stable liquidity position in terms of cash.

Summary:
Overall, Korn Ferry's liquidity ratios have demonstrated a generally stable and healthy liquidity position over most of the analyzed periods. The ratios tend to hover around levels that suggest the company can meet its short-term liabilities with its current and liquid assets. However, certain anomalies, such as the negative ratios observed in July 2023, merit further investigation to determine the underlying causes—whether they stem from extraordinary events, accounting adjustments, or temporary liquidity strains. The rebound in subsequent periods indicates resilience and restoration of liquidity strength.

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Additional liquidity measure

The analysis of Korn Ferry’s cash conversion cycle (CCC) over the period from April 2020 to October 2024 reveals notable fluctuations and some distinct trends.

Initially, in April 2020, the CCC was approximately 27.79 days, indicating a relatively efficient cycle where the company was able to convert its investments in inventory and receivables into cash in just over four weeks. This period experienced a significant increase by July 2020, reaching 77.22 days, which persisted through October 2020 at 78.45 days. Such growth suggests that during this timeframe, Korn Ferry faced delays in converting its receivables into cash or experienced extended periods tied up in working capital components.

Between late 2020 and early 2021, a notable decline occurred, with the CCC decreasing to 66.50 days by January 2021 and further dropping to 34.45 days in April 2021. This improvement indicates enhanced efficiency in managing receivables and payables. However, from April 2021 onward, the cycle lengthened again, with July 2021 recording 72.84 days and October 2021 at 86.57 days, reflecting increased working capital needs or slower collections.

A significant anomaly appeared at the beginning of 2022, with the CCC turning negative in January 2022 at -57.38 days, and remaining negative in April 2022 at -55.86 days. Negative CCC values imply that Korn Ferry was able to collect receivables and extend payables to such an extent that its cash inflows occurred before outflows, significantly freeing up working capital during this period. This situation persisted but slightly improved by July and October 2022, with values of 85.00 and 87.75 days respectively, indicating a return to a more traditional positive cycle length.

Post-2022, the CCC generally returned to positive territory, with notable fluctuations. In January 2023, the cycle shortened dramatically to 19.22 days, suggesting increased operational efficiency or faster cash collection. This was followed by an increase to 75.50 days in April 2023, then a substantial decrease again to 22.33 days in July 2023, and further to 32.21 days in October 2023. These fluctuations may reflect tactical changes in receivables collection, payables management, or shifts in client engagement strategies.

Looking ahead, the data indicates a normalization trend, with CCC values around the mid-60s to low 70s days from January 2024 onwards, and projections showing a gradual stabilization near 67.58 days by January 2025.

Overall, the cash conversion cycle for Korn Ferry demonstrates periods of both improved efficiency and significant variability, including episodes of negative CCC. These dynamics suggest a strategic adjustment in working capital management, possibly influenced by client contract structures, collection policies, or operational strategies aimed at optimizing liquidity.