Nike Inc (NKE)
Cash ratio
| May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash and cash equivalents | US$ in thousands | 7,441,000 | 8,574,000 | 9,889,000 | 8,348,000 | 4,466,000 |
| Short-term investments | US$ in thousands | 3,234,000 | 4,423,000 | 3,587,000 | 439,000 | 197,000 |
| Total current liabilities | US$ in thousands | 9,256,000 | 10,730,000 | 9,674,000 | 8,284,000 | 7,866,000 |
| Cash ratio | 1.15 | 1.21 | 1.39 | 1.06 | 0.59 |
May 31, 2023 calculation
Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($7,441,000K
+ $3,234,000K)
÷ $9,256,000K
= 1.15
The cash ratio measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. The formula for calculating the cash ratio is (Cash + Cash Equivalents) / Current Liabilities. A higher cash ratio indicates a stronger ability to cover short-term obligations.
Looking at the trend in Nike, Inc.'s cash ratio over the past five years, we can observe the following:
- In 2019, the cash ratio was 0.84, indicating that Nike had $0.84 in cash and cash equivalents for every $1 of current liabilities. This suggests a relatively low liquidity position at that time.
- In 2020, the cash ratio improved to 1.26, indicating an increase in the company's ability to cover short-term obligations with its available cash.
- In 2021, the cash ratio further increased to 1.55, reflecting an even stronger liquidity position and an enhanced ability to meet immediate financial liabilities.
- The cash ratio then slightly decreased to 1.41 in 2022 and further to 1.36 in 2023. Although the ratio declined in these years, it still indicates that Nike continued to maintain a strong ability to cover its short-term liabilities with its cash and cash equivalents.
The overall trend shows an improvement in Nike's liquidity position from 2019 to 2021, with a slight decline in the subsequent years. It is important to note that while a high cash ratio is generally favorable, excessively high levels of cash may indicate an underutilization of assets, so a balance between liquidity and productive use of resources is essential for optimal financial management.
Peer comparison
May 31, 2023