Callaway Golf Company (MODG)

The liquidity ratios of Callaway Golf Company have shown fluctuations over the years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has decreased from 2.33 in December 2020 to 1.94 in December 2024. This indicates that the company may have slightly less liquidity to cover its short-term obligations in the most recent year compared to previous years.

Similarly, the quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, has also experienced a decline from 1.29 in December 2020 to 0.77 in December 2024. This indicates that the company's ability to meet its immediate obligations using its most liquid assets has decreased over the years.

On the other hand, the cash ratio, which specifically measures the company's ability to cover its current liabilities with cash and cash equivalents, has fluctuated but generally improved from 0.94 in December 2020 to 0.54 in December 2024. This suggests that Callaway Golf Company has increased its cash reserves relative to its current liabilities, which can be a positive sign for its short-term financial stability.

Overall, while the current and quick ratios have shown a decline over the years, the company's cash ratio has improved, indicating a mixed picture in terms of liquidity. Watchful monitoring of these ratios is advisable to assess the company's ongoing ability to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Callaway Golf Company has exhibited fluctuations over the past five years. In 2020, the company's cash conversion cycle stood at 92.85 days, indicating that it took Callaway approximately 92.85 days to convert its investments in inventory and other resources into cash from sales.

However, by the end of 2021, the cash conversion cycle had significantly increased to 178.23 days, suggesting a longer period was required to complete the cash conversion process. This trend continued into 2022, where the cycle further extended to 296.63 days, indicating a considerable delay in converting investments into cash.

In 2023, there was a slight improvement in the cash conversion cycle, as it decreased to 235.82 days, but still remained at a relatively high level compared to 2020. Finally, by the end of 2024, Callaway managed to significantly reduce its cash conversion cycle to 109.92 days, signaling an improvement in efficiency in managing its working capital and cash flow.

Overall, the fluctuating nature of Callaway Golf Company's cash conversion cycle reflects varying efficiency levels in managing its inventory, receivables, and payables over the five-year period. Continued monitoring and optimization of this metric will be crucial for the company to enhance its liquidity and operational performance.