Leslies Inc (LESL)

Based on the liquidity ratios of Leslies Inc over the last three years, there are notable trends worth considering.

The current ratio for Sep 30, 2023, stands at 1.86, which indicates an improvement from the previous year (1.56) but is lower compared to Sep 30, 2021 (1.94). A current ratio above 1 suggests that the company has sufficient current assets to cover its current liabilities.

The quick ratio has decreased over the three-year period, from 1.25 in 2021 to 0.40 in 2023. This decline may raise concerns about the company's ability to meet its short-term obligations without relying on inventory.

Furthermore, the cash ratio has also shown a downward trend, dropping from 1.11 in 2021 to 0.25 in 2023. A declining cash ratio may suggest that the company has less cash available relative to its current liabilities, which could indicate potential liquidity challenges.

Overall, while the current ratio of Leslies Inc has improved in 2023, the decreasing trend in quick and cash ratios raises some concerns about the company's ability to meet its short-term obligations without a significant reliance on inventory or cash reserves. Management should closely monitor these ratios and take appropriate actions to ensure optimal liquidity levels.

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Additional liquidity measure

Leslies Inc's cash conversion cycle provides insight into the efficiency of its working capital management. The company's cash conversion cycle has shown an increasing trend over the past three years, indicating potential challenges in managing cash flow and liquidity.

In 2021, Leslies Inc had a relatively low cash conversion cycle of 42.99 days, suggesting the company was able to quickly convert its inventory into sales and then into cash. However, by 2023, the cash conversion cycle had increased to 76.13 days, signifying a lengthening time period for the company to convert its resources back into cash.

This longer cash conversion cycle could be a concern as it may tie up cash within the company for extended periods, potentially impacting its ability to invest in growth opportunities or meet short-term obligations promptly.

Leslies Inc should assess its inventory management, accounts receivable collection, and accounts payable practices to identify opportunities for improvement in its cash conversion cycle and overall working capital efficiency. A more streamlined cash conversion cycle could enhance the company's financial performance and competitiveness in the market.