Macy’s Inc (M)

Based on the provided data, Macy’s Inc's liquidity ratios have shown fluctuations over the past five years.

1. Current Ratio: The current ratio measures Macy’s ability to pay its short-term obligations with its current assets. Macy’s current ratio has varied between 1.15 and 1.37 over the past five years, with the latest reported ratio being 1.37 as of Feb 3, 2024. This indicates that Macy’s had $1.37 in current assets to cover each $1 of current liabilities, showing an improvement in liquidity compared to the previous years.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, excludes inventory from current assets to provide a more stringent measure of liquidity. Macy’s quick ratio has fluctuated between 0.19 and 0.37 over the same period, with the latest value reported as 0.30. A quick ratio below 1 suggests Macy’s may have difficulty meeting its short-term obligations without relying on selling inventory, and an increasing trend in this ratio is favorable for liquidity.

3. Cash Ratio: The cash ratio is the most conservative liquidity ratio, measuring Macy’s ability to cover current liabilities using only cash and cash equivalents. Macy’s cash ratio has ranged from 0.12 to 0.32 over the past five years, with the latest ratio reported as 0.23. A higher cash ratio indicates a greater ability to meet short-term liabilities without relying on other current assets.

In summary, Macy’s Inc has shown improvements in its liquidity position based on the current, quick, and cash ratios over the past year, as indicated by higher ratios compared to the previous years. However, it is essential for Macy’s to maintain a strong liquidity position to ensure it can meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Macy’s Inc has shown fluctuations over the past five years. In FY2024, the cash conversion cycle increased to 42.15 days from 38.17 days in FY2023, indicating that the company took longer to convert its investments in inventory into cash. However, comparing FY2024 to FY2022 and FY2021, Macy's improved its cash conversion cycle slightly, implying more efficient management of working capital during FY2024.

Notably, in FY2020, Macy’s experienced a significant increase in its cash conversion cycle to 57.89 days, suggesting inefficiencies in managing inventory, receivables, and payables, which impacted the company's cash flow and liquidity position.

Overall, Macy’s should continue to focus on optimizing its cash conversion cycle by enhancing inventory management, negotiating favorable payment terms with suppliers, and improving collection processes from customers to strengthen its cash flow and overall financial performance.