MillerKnoll Inc (MLKN)

The analysis of MillerKnoll Inc.’s liquidity ratios over the observed period reveals the company's capacity to meet short-term obligations through various measures of liquidity.

Current Ratio:
The current ratio has exhibited a generally stable trend with some fluctuations, indicating the company's ability to cover its current liabilities with its current assets. Starting at 1.50 as of May 31, 2022, it increased to a peak of 1.74 in early 2023, suggesting improved liquidity and a stronger short-term asset base relative to liabilities during this period. After this peak, the ratio declined gradually, reaching approximately 1.56 in late 2023. The ratio remains above the commonly accepted minimum of 1.0, implying that MillerKnoll maintains adequate liquidity, though the slight downward trend towards 2025 to around 1.53 indicates a potential tightening of liquidity margins.

Quick Ratio (Acid-Test Ratio):
The quick ratio reflects a more stringent liquidity measure, excluding inventory from current assets. Historically, it fluctuated, starting from 0.71 in May 2022, rising to a high of 0.84 in mid-2023, indicating an improved ability to meet immediate liabilities with liquid assets. Notably, there was a dip on September 3, 2022, to 0.28, likely attributable to temporary changes in liquid asset composition or liabilities. Subsequent periods show a generally positive trend, maintaining a level around 0.77 to 0.84 in late 2023. These figures suggest that MillerKnoll's short-term liquid assets have been sufficient to cover a significant portion of immediate liabilities, though they remain below the ideal 1.0 level, indicating potential reliance on inventories or other less liquid current assets to meet short-term obligations.

Cash Ratio:
The cash ratio, representing the most conservative liquidity measure by focusing solely on cash and cash equivalents, has remained relatively stable but low, fluctuating between 0.25 and 0.33. At its highest, it reached 0.33 in early 2023 and remained near this level through late 2023. The low values across the period highlight that MillerKnoll’s immediate cash holdings are a limited portion of current liabilities. Conversely, this indicates that the company relies on broader short-term assets for liquidity and is not overly dependent on cash reserves alone to meet obligations.

Overall Summary:
MillerKnoll Inc. maintains a prudent liquidity position with current and quick ratios generally above or near the 1.0 threshold, indicating sufficient short-term asset coverage of liabilities, although often below ideal levels. The gradual decline in the current ratio suggests a conservative trend, which warrants monitoring to ensure liquidity remains adequate. The low cash ratio underscores limited immediate cash reserves, emphasizing reliance on other liquid assets or operational cash flows. Collectively, these ratios suggest that MillerKnoll is positioned to meet its short-term obligations but should be mindful of potential tightening liquidity margins as ratios fluctuate over time.

---

Additional liquidity measure

The analysis of MillerKnoll Inc's cash conversion cycle (CCC) over the period from May 31, 2022, to May 31, 2025, reveals notable fluctuations, indicative of varying operational efficiencies and inventory management practices.

Initially, the CCC experienced notable variability, with a low of 32.64 days on December 3, 2022, and a high of 69.41 days on November 30, 2022. The decline to a minimum during December 2022 suggests periods of improved operational efficiency, potentially attributable to streamlined receivables and inventory turnover. Conversely, the spike in late 2022 indicates periods where cash tied up in inventory and receivables increased, lengthening the cash cycle.

Throughout mid-2023, the CCC fluctuated, reaching a low of 28.47 days on March 4, 2023, and gradually rising thereafter. By August 31, 2023, the CCC stabilized around 41.12 days, suggesting a period of relative operational consistency. This stabilization might signal efforts to manage working capital more effectively, although minor fluctuations persisted.

From late 2023 onwards, a gradual upward trend emerged, with the CCC rising from approximately 39.35 days in November 2023 to over 66 days by February 2025. Such increasing values imply longer durations for converting inventories and receivables into cash, which could point to slowing inventory turnover, lengthening receivables collection periods, or shifts in receivables and inventory management strategies.

Overall, the data indicates that MillerKnoll Inc's cash conversion cycle has experienced considerable fluctuation over the analyzed period. The recent upward trend toward approximately 66 days suggests a potential weakening in operational efficiency or strategic changes impacting receivables and inventory handling. Maintaining or reducing the CCC could enhance liquidity and working capital management, while prolonged cycles might impose liquidity constraints and affect financial flexibility.