Ollie's Bargain Outlet Hldg (OLLI)

The liquidity ratios for Ollie's Bargain Outlet Hldg, specifically the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to pay off its short-term liabilities with its current assets.
- Ollie's Bargain Outlet Hldg's current ratio has been relatively stable over the past five years, ranging from 2.44 to 2.91, with the most recent ratio standing at 2.76.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, and the higher the ratio, the better the company's short-term liquidity position.
- Ollie's current ratio above 2 in most years suggests a healthy liquidity position, indicating the company's capability to cover its short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventories from current assets.
- Ollie's Bargain Outlet Hldg's quick ratio fluctuated over the years, with the latest figure at 1.13, reflecting a slightly improved liquidity position compared to the previous year.
- A quick ratio above 1 indicates that the company can meet its short-term liabilities using its most liquid assets without relying on inventory sales.
- Ollie's quick ratio above 1 in recent years indicates a reasonably good ability to cover immediate obligations with liquid assets.

3. Cash Ratio:
- The cash ratio is the most stringent liquidity ratio as it measures the company's ability to cover short-term liabilities only with cash and cash equivalents.
- Ollie's Bargain Outlet Hldg's cash ratio has been relatively stable above 1 over the past five years, reaching 1.12 in the most recent period.
- A cash ratio above 1 indicates that the company holds enough cash to cover its short-term obligations entirely.
- Ollie's consistent cash ratio above 1 suggests a strong ability to meet immediate liabilities with cash on hand.

Overall, based on the analysis of the liquidity ratios, Ollie's Bargain Outlet Hldg appears to maintain a healthy liquidity position over the years, with current, quick, and cash ratios consistently above benchmark levels, indicating the company's ability to meet its short-term financial obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Ollie's Bargain Outlet Holding has fluctuated over the past five years. In the fiscal year ending February 3, 2024, the company's cash conversion cycle was 73.92 days, showing an improvement compared to the previous year. This indicates that Ollie's Bargain Outlet is managing its cash flow more efficiently, taking fewer days to convert its investments in inventory into cash.

In the preceding fiscal year ending January 28, 2023, the cash conversion cycle was 82.32 days, suggesting a slight increase in the time taken to convert inventory into cash compared to the current year. However, it is worth noting that this metric was higher in the fiscal year ending January 29, 2022, at 85.31 days, indicating a longer cash conversion cycle.

On the other hand, the cash conversion cycle was at its lowest in the fiscal year ending January 30, 2021, at 56.49 days, reflecting an efficient cash conversion process during that period. However, there was a subsequent increase in the cycle in the fiscal year ending February 1, 2020, to 81.02 days, indicating a lengthening of the time taken to convert inventory into cash.

Overall, a lower cash conversion cycle signifies that Ollie's Bargain Outlet is managing its working capital effectively and converting its inventory and accounts receivable into cash at a faster pace. Conversely, a higher cash conversion cycle suggests inefficiencies in managing working capital and could indicate potential challenges in liquidity and cash flow management.