CarMax Inc (KMX)

Liquidity ratios

	Feb 28, 2025	Nov 30, 2024	Aug 31, 2024	May 31, 2024	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
Current ratio	2.31	2.30	2.25	2.50	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
Quick ratio	0.11	0.13	0.24	0.38	0.47	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
Cash ratio	0.11	0.13	0.24	0.38	0.47	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

CarMax Inc's current ratio has shown a generally stable trend over the observed period, starting at 2.85 on May 31, 2020, and fluctuating between 2.24 and 3.20 until February 28, 2025. This indicates the company's ability to meet its short-term obligations with its current assets, where a ratio above 1.0 is considered healthy.

On the other hand, the quick ratio, which excludes inventory from current assets, has been more volatile, ranging from 0.03 to 0.47 during the same period. The ratio was lowest on November 30, 2020, and February 28, 2021, raising concerns about CarMax's ability to cover immediate liabilities with its most liquid assets.

The cash ratio, a more stringent measure of liquidity, reflected a similar pattern to the quick ratio, suggesting that CarMax's cash holdings play a significant role in its ability to meet short-term obligations. Notably, the cash ratio was highest on February 29, 2024, implying stronger liquidity at that point in time.

Overall, while CarMax Inc has generally maintained a current ratio above 1.0, indicating a strong ability to cover short-term liabilities, the variability in the quick and cash ratios highlights the potential challenges in quickly meeting obligations without relying on inventory or other less liquid assets.

Additional liquidity measure

		Feb 28, 2025	Nov 30, 2024	Aug 31, 2024	May 31, 2024	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
Cash conversion cycle	days	61.06	57.43	53.27	58.84	56.20	55.59	57.70	58.84	50.59	43.36	55.89	56.55	65.37	65.01	65.09	57.93	69.54	62.11	64.60	43.75

The cash conversion cycle of CarMax Inc has shown variability over the years based on the provided data. The cash conversion cycle is a measure of the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

From May 31, 2020, to February 28, 2025, CarMax's cash conversion cycle fluctuated between 43.36 days and 69.54 days. Notably, there was a peak observed on February 28, 2021, with a cycle of 69.54 days, indicating an extended time to convert investments into cash. However, the company managed to reduce this cycle significantly by May 31, 2022, with a cycle of 56.55 days.

In general, a lower cash conversion cycle is favorable as it implies that the company is efficient in managing its working capital and converting investments into cash swiftly. By monitoring and managing the cash conversion cycle effectively, CarMax can optimize its operational efficiency and improve its cash flow management.