CarMax Inc (KMX)

Liquidity ratios

Feb 29, 2024 Nov 30, 2023 Aug 31, 2023 May 31, 2023 Feb 28, 2023 Nov 30, 2022 Aug 31, 2022 May 31, 2022 Feb 28, 2022 Nov 30, 2021 Aug 31, 2021 May 31, 2021 Feb 28, 2021 Nov 30, 2020 Aug 31, 2020 May 31, 2020 Feb 29, 2020 Nov 30, 2019 Aug 31, 2019 May 31, 2019
Current ratio 2.26 2.45 2.32 2.54 2.60 2.57 2.75 2.72 3.20 2.90 2.74 2.24 2.42 2.60 2.71 2.85 2.39 2.43 2.42 2.21
Quick ratio 7.46 8.31 7.45 7.99 8.54 8.65 7.53 7.15 7.66 7.56 7.73 7.14 8.14 9.49 8.72 11.86 0.16 0.16 0.15 0.14
Cash ratio 0.25 0.29 0.22 0.13 0.16 0.36 0.03 0.04 0.05 0.03 0.03 0.18 0.08 0.16 0.45 0.57 0.04 0.04 0.03 0.03

CarMax Inc's liquidity ratios have shown fluctuations over the past few quarters. The current ratio has ranged between 2.24 and 3.20, indicating that the company has generally been able to meet its short-term obligations with its current assets. The current ratio peaked at 3.20 in the third quarter of 2022, suggesting strong liquidity at that time.

The quick ratio, which excludes inventory from current assets, has been more volatile, ranging from 7.14 to 11.86. This ratio remained above 7 in most periods, indicating that CarMax has a significant amount of highly liquid assets to cover its short-term liabilities. However, the quick ratio dropped significantly in the first quarter of 2020, reaching as low as 0.16, which could suggest a strain on liquidity in that period.

The cash ratio, which is the most stringent measure of liquidity, has shown even greater variability, ranging from 0.03 to 0.57. The cash ratio fluctuated significantly, with the highest level of 0.57 in the second quarter of 2020. This indicates that CarMax had a relatively high amount of cash reserves compared to its current liabilities at that time.

Overall, while CarMax Inc generally maintains strong liquidity positions, as evidenced by the current and quick ratios being consistently above 1, the fluctuations in the quick and cash ratios suggest some variability in the company's ability to cover its short-term obligations with its most liquid assets.

Additional liquidity measure

Feb 29, 2024 Nov 30, 2023 Aug 31, 2023 May 31, 2023 Feb 28, 2023 Nov 30, 2022 Aug 31, 2022 May 31, 2022 Feb 28, 2022 Nov 30, 2021 Aug 31, 2021 May 31, 2021 Feb 28, 2021 Nov 30, 2020 Aug 31, 2020 May 31, 2020 Feb 29, 2020 Nov 30, 2019 Aug 31, 2019 May 31, 2019
Cash conversion cycle days 271.29 272.82 270.42 261.17 238.92 218.47 218.15 218.06 231.71 244.43 262.36 266.24 315.69 310.35 312.12 295.53 47.18 47.00 46.81 45.82

The cash conversion cycle of CarMax Inc has exhibited fluctuations over the past few reporting periods. The company's cash conversion cycle, which represents the time it takes to convert inventory into cash, has ranged between 218 and 315 days over the analyzed periods.

In general, a longer cash conversion cycle suggests that CarMax Inc takes more time to sell its inventory and collect cash from customers. This can tie up working capital and impact liquidity. On the contrary, a shorter cash conversion cycle indicates that the company can efficiently manage its inventory and collect payments, thus freeing up cash for other uses.

Analyzing the trend, there seems to be variability in the cash conversion cycle, with periods of both increase and decrease. It is crucial for CarMax Inc to closely monitor and manage its inventory turnover, accounts receivable collection, and accounts payable payment to optimize the cash conversion cycle and improve working capital efficiency.

Overall, understanding and managing the cash conversion cycle is essential for CarMax Inc to ensure effective cash flow management and sustainable operations.