La-Z-Boy Incorporated (LZB)

The liquidity ratios of La-Z-Boy Incorporated provide insights into the company's ability to meet its short-term obligations.

1. Current Ratio:
The current ratio, which is calculated by dividing current assets by current liabilities, indicates La-Z-Boy's short-term liquidity position. Over the periods provided, the current ratio has shown a generally increasing trend, starting at 1.41 in April 2022 and reaching 1.85 in January 2025. This suggests that the company's current assets are consistently higher than its current liabilities, indicating a strong ability to cover short-term obligations.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. The trend in La-Z-Boy's quick ratio has also been increasing over time, from 0.39 in April 2022 to 0.69 in January 2025. Despite fluctuations, the quick ratio generally remains below 1, indicating that the company may have difficulty covering immediate liabilities with its most liquid assets.

3. Cash Ratio:
The cash ratio, the most conservative measure of liquidity, considers only cash and cash equivalents in relation to current liabilities. La-Z-Boy's cash ratio has shown stability over time, hovering around 0.70 to 0.80 from April 2022 to January 2025. While the cash ratio provides a clear view of the company's ability to pay off short-term debt using cash alone, it also indicates a potential reliance on other current assets to meet obligations.

In summary, La-Z-Boy's liquidity ratios suggest a generally stable liquidity position with improving current ratios and consistent cash ratios. However, the quick ratio remains relatively low, indicating a potential need to manage inventory levels more efficiently to enhance short-term liquidity.

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Additional liquidity measure

The cash conversion cycle for La-Z-Boy Incorporated has shown fluctuations over the period indicated in the data. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Looking at the data provided, we observe that the cash conversion cycle ranged from 66.61 days to 89.58 days over the period. A lower cash conversion cycle indicates that the company is more efficient in managing its working capital as it takes less time to convert its investments into cash. Conversely, a higher cash conversion cycle may indicate inefficiencies in managing inventory, collections, or payables, potentially tying up cash that could be used elsewhere.

Throughout the data period, the cash conversion cycle fluctuated, with some periods showing improvements in efficiency (e.g., April 29, 2023), while other periods showing an increase in days required to convert investments into cash (e.g., January 31, 2025). It would be important for La-Z-Boy to analyze the reasons behind these fluctuations to identify opportunities for operational improvement and optimize its working capital management.

Overall, analyzing the cash conversion cycle provides insights into the company's efficiency in managing its working capital and how quickly it can convert its investments into cash, which is crucial for maintaining liquidity and supporting future growth and operations.