Kroger Company (KR)

Liquidity ratios provide valuable insights into a company's ability to meet its short-term obligations. The current ratio, which measures the company's ability to cover short-term liabilities with short-term assets, has fluctuated for Kroger Company over the past five years, ranging from 0.74 to 0.81. A current ratio below 1 may indicate potential liquidity issues, as seen in most years for Kroger.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown variability for Kroger, with values ranging from 0.15 to 0.25. A quick ratio significantly lower than 1 suggests that a company may have difficulty meeting its immediate obligations without relying on selling inventory.

Finally, the cash ratio, which is the most conservative liquidity measure, reflects Kroger's ability to cover current liabilities with cash and cash equivalents. The cash ratio has increased over the years, reaching 0.12 in 2024. This indicates that Kroger has improved its ability to cover short-term obligations with readily available cash resources.

Overall, Kroger's liquidity ratios suggest that the company may have faced challenges in meeting its short-term obligations in recent years, especially evident in the low quick ratios. While the cash ratio has improved, indicating enhanced cash reserves, Kroger may need to closely monitor its liquidity position to ensure it can meet its financial commitments in the future.

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Additional liquidity measure

The cash conversion cycle for Kroger Company has fluctuated over the past five years, ranging from -4.93 days to 7.90 days. A negative cash conversion cycle indicates that the company is able to collect cash from its sales before paying suppliers, which can be a favorable scenario as it signifies efficient cash management.

In the most recent year, as of February 3, 2024, Kroger's cash conversion cycle was -4.93 days, indicating a particularly efficient operation where the company is collecting cash from customers before paying its suppliers. This could be a result of effective inventory management and quick collection of accounts receivables.

In the preceding years, the cash conversion cycle ranged between 3.74 days to 7.90 days. This variability suggests fluctuations in the company's efficiency in managing its working capital. Generally, a shorter cash conversion cycle is favorable as it reflects the company's ability to convert inventory into cash quickly.

It is important for Kroger to continue monitoring and managing its cash conversion cycle effectively to ensure optimal liquidity and working capital management. By maintaining a short and efficient cash conversion cycle, Kroger can enhance its cash flow position and overall financial performance.