Lamb Weston Holdings Inc (LW)

The analysis of Lamb Weston Holdings Inc.'s liquidity ratios over the specified periods reveals notable trends and shifts in the company's short-term liquidity position.

The current ratio, which measures the company's ability to satisfy its short-term obligations with its total current assets, remained stable at 1.56 as of both May 28 and May 31, 2023. However, by May 26, 2024, the ratio declined to 1.29, indicating a reduction in current assets relative to current liabilities. This downward trend persisted into the subsequent period, with the ratio maintaining at 1.29 on May 31, 2024, and slightly increasing to 1.38 by May 31, 2025. Despite the slight improvement, the current ratio remains below the levels observed in 2023, suggesting a modest deterioration in short-term liquidity.

The quick ratio, which assesses the company's ability to meet short-term liabilities using its most liquid assets (excluding inventory), was stable at 0.76 during 2023. Moving into 2024, there was a pronounced decline to 0.50, highlighting a significant reduction in liquid assets available to cover immediate liabilities. This ratio remained at 0.50 on May 31, 2024, before experiencing a marginal increase to 0.58 by May 31, 2025. The decline from 2023 to 2024 indicates a tightening of liquidity, with less liquid assets on hand relative to current liabilities.

The cash ratio, which provides the most conservative measure of liquidity by considering only cash and cash equivalents, was 0.22 in 2023, reflecting that roughly 22% of current liabilities could be covered by available cash. In 2024, this ratio sharply declined to 0.04 by May 26 and May 31, reflecting a substantial reduction in immediate cash resources. The ratio experienced a slight increase to 0.05 by May 31, 2025, yet still remains significantly below the levels seen in 2023. This suggests a notable decrease in the company's immediate cash reserves relative to its short-term obligations.

Overall, these ratios collectively indicate that Lamb Weston Holdings Inc. experienced a decline in liquidity from 2023 through 2024, primarily driven by reductions in liquid assets and cash reserves. Although there is a modest improvement projected for 2025, the company's short-term liquidity position remains somewhat constrained, with ratios below the more comfortable thresholds typically considered indicative of robust liquidity.

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Additional liquidity measure

The data indicates that Lamb Weston Holdings Inc's cash conversion cycle (CCC) has experienced variability over the recent periods. As of May 28, 2023, the CCC was approximately 73.30 days, which slightly decreased to 76.92 days by May 31, 2023. Moving forward, the CCC showed a notable reduction, reaching its lowest point at approximately 62.59 days on May 26, 2024. This decline suggests an improvement in the company's ability to convert its investments in inventory and accounts receivable into cash more efficiently during this period. However, in the subsequent period ending May 31, 2024, the CCC increased again to 65.63 days, indicating a partial reversal of the earlier improvement. By May 31, 2025, the CCC had risen further to approximately 74.49 days, approaching the earlier levels observed in 2023.

Overall, the trend reveals that Lamb Weston Holdings Inc's cash conversion cycle has fluctuated within a range roughly between 62.59 days and 76.92 days over the observed periods. The recent increase towards the end of the timeframe suggests a potential elongation in the company's cash recovery process, which could be influenced by factors such as changes in inventory turnover, receivables collection periods, or payables management. Continuous monitoring of these components would offer further insights into the efficiency and operational management of the company's working capital.