McCormick & Company Incorporated (MKC)
Quick ratio
| Nov 30, 2023 | Nov 30, 2022 | Nov 30, 2021 | Nov 30, 2020 | Nov 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash | US$ in thousands | 166,600 | 334,000 | 351,700 | 423,600 | 155,400 |
| Short-term investments | US$ in thousands | — | — | — | — | — |
| Receivables | US$ in thousands | 587,500 | 573,700 | 549,500 | 528,500 | 502,900 |
| Total current liabilities | US$ in thousands | 3,098,900 | 3,432,400 | 3,223,800 | 3,046,500 | 2,154,400 |
| Quick ratio | 0.24 | 0.26 | 0.28 | 0.31 | 0.31 |
November 30, 2023 calculation
Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($166,600K
+ $—K
+ $587,500K)
÷ $3,098,900K
= 0.24
The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It is calculated by subtracting inventories from current assets and then dividing by current liabilities. A higher quick ratio indicates a better ability to cover short-term liabilities.
Looking at the historical quick ratio of McCormick & Co., Inc., it has shown a decreasing trend over the past five years, declining from 0.35 in 2019 to 0.28 in 2023. This indicates a potential weakening in the company's short-term liquidity position.
A quick ratio of 0.28 in 2023 means that for every $1 of current liabilities, the company has $0.28 of highly liquid assets available to meet those obligations. While this suggests a relatively low level of liquidity, it's important to consider the industry standards and the company's specific business model and operations when assessing the adequacy of the quick ratio.
In conclusion, the decreasing trend in McCormick & Co., Inc.'s quick ratio warrants further analysis and monitoring to understand the factors driving the decrease and to assess the company's short-term liquidity risk.