Nike Inc (NKE)
Liquidity ratios
| May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 2.72 | 2.63 | 2.72 | 2.48 | 2.10 |
| Quick ratio | 1.60 | 1.65 | 1.85 | 1.39 | 1.14 |
| Cash ratio | 1.15 | 1.21 | 1.39 | 1.06 | 0.59 |
The liquidity ratios of Nike, Inc. indicate the company's ability to meet its short-term financial obligations with its current assets. Let's analyze the current ratio, quick ratio, and cash ratio for the past five years to understand the company's liquidity position.
1. Current Ratio:
The current ratio measures Nike's ability to cover its short-term liabilities with its current assets. A higher current ratio is generally favorable, indicating a stronger ability to pay its short-term obligations. Nike's current ratio has shown a consistent improvement over the past five years, increasing from 2.10 in 2019 to 2.72 in 2023. This indicates that the company has been able to enhance its liquidity position and is in a better position to meet its short-term obligations.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity as it excludes inventory from current assets. Nike's quick ratio has also demonstrated a positive trend, albeit with some fluctuations, from 1.39 in 2019 to 1.81 in 2023. The ratios above 1 suggest that Nike has a satisfactory ability to meet its short-term obligations with its most liquid assets.
3. Cash Ratio:
The cash ratio focuses solely on the most liquid current assets, which are cash and cash equivalents, providing an even more conservative measure of liquidity. Nike's cash ratio has consistently improved over the five-year period, increasing from 0.84 in 2019 to 1.36 in 2023. This indicates that Nike's cash position has strengthened, enabling the company to rely more on cash to meet its short-term liabilities.
Overall, based on the trend in these liquidity ratios, Nike's liquidity position has improved over the past five years. The company's ability to meet its short-term obligations with its current and most liquid assets has strengthened, reflecting positive liquidity management and financial stability.
See also:
Additional liquidity measure
| May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 74.37 | 82.60 | 75.47 | 81.34 | 72.09 |
The cash conversion cycle (CCC) measures how efficiently a company manages its working capital, including inventory, accounts receivable, and accounts payable. A shorter CCC indicates that a company is able to convert its resources into cash more quickly.
Looking at Nike, Inc.'s CCC over the past five years, we see that it has fluctuated. In 2023, the CCC was 100.00 days, a slight improvement from 109.70 days in 2022. This suggests that Nike was able to manage its working capital more effectively in 2023.
In 2021, the CCC was 96.25 days, indicating an efficient management of working capital, an improvement compared to 115.12 days in 2020. However, the CCC was lower at 90.62 days in 2019, indicating even more effective management of working capital.
Overall, Nike's CCC has shown some variability, but the general trend has been towards more efficient working capital management, as evidenced by the decreasing trend from 2019 to 2021. This is a positive sign, suggesting that Nike has been able to better manage its cash flows, inventory, and accounts receivable over the years. It is important to note that a lower CCC can indicate that the company has the potential to generate cash and profits more efficiently.