Monro Muffler Brake Inc (MNRO)

The liquidity ratios of Monro Muffler Brake Inc indicate the company's ability to meet its short-term obligations and manage its current assets effectively.

1. Current Ratio: The current ratio, which measures the company's ability to pay off its short-term liabilities with its current assets, has been on a declining trend over the years. It decreased from 0.92 in 2021 to 0.56 in 2024, signaling a potential strain on the company's liquidity position. A current ratio below 1 suggests that the company may have difficulty meeting its short-term obligations using its current assets alone.

2. Quick Ratio: The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also shows a decreasing trend over the years. The decrease from 0.24 in 2021 to 0.10 in 2024 indicates a diminishing ability to cover short-term liabilities with liquid assets. A quick ratio below 1 may indicate potential difficulties in meeting immediate obligations without relying on selling inventory.

3. Cash Ratio: The cash ratio, which specifically assesses the company's ability to cover its short-term liabilities with cash and cash equivalents, has declined significantly over the years. The decrease from 0.10 in 2021 to 0.01 in 2024 indicates a decreasing level of immediate liquidity. A cash ratio of 0.01 suggests that the company has very limited cash on hand relative to its short-term obligations, which may pose a liquidity risk.

Overall, the declining trend in all three liquidity ratios indicates a potential liquidity challenge for Monro Muffler Brake Inc. It may face difficulties in meeting its short-term obligations if the trend continues, highlighting the importance of effective cash flow management and potential need for additional liquidity measures in the future.

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Additional liquidity measure

Monro Muffler Brake Inc's cash conversion cycle has shown significant fluctuations over the past five years.

As of March 31, 2021, the company had a cash conversion cycle of 38.30 days, indicating that it took around 38 days to convert its investments in inventory and accounts receivable into cash.

By March 31, 2022, the cash conversion cycle had improved to 23.05 days, suggesting that Monro Muffler Brake Inc was able to manage its working capital more efficiently, thus reducing the time it took to convert assets into cash.

Surprisingly, by March 31, 2023, the cash conversion cycle turned negative at -44.35 days, implying that the company was able to convert its investments into cash even before paying off its liabilities and acquiring new inventory. This could indicate a very efficient cash management strategy or potential issues with inventory and accounts payable.

The trend continued into March 31, 2024, with a cash conversion cycle of -31.56 days, showing further improvement in the company's working capital management.

Finally, as of March 31, 2025, the cash conversion cycle was recorded at 0.00 days, indicating that Monro Muffler Brake Inc was able to effectively balance its cash flows, with its investments in inventory and accounts receivable roughly matching the length of time it took to collect cash from customers.

Overall, the significant fluctuations in Monro Muffler Brake Inc's cash conversion cycle over the years suggest fluctuations in inventory management, accounts receivable collection, and payment to suppliers that merit further investigation to understand the underlying causes and implications for the company's financial performance.