Paychex Inc (PAYX)

Liquidity ratios

May 31, 2024 Feb 29, 2024 Nov 30, 2023 Aug 31, 2023 May 31, 2023 Feb 28, 2023 Nov 30, 2022 Aug 31, 2022 May 31, 2022 Feb 28, 2022 Nov 30, 2021 Aug 31, 2021 May 31, 2021 Feb 28, 2021 Nov 30, 2020 Aug 31, 2020 May 31, 2020 Feb 29, 2020 Nov 30, 2019 Aug 31, 2019
Current ratio 1.37 1.24 1.23 1.24 1.30 1.27 1.30 1.29 1.25 1.27 1.27 1.27 1.25 1.24 1.28 1.25 1.23 1.19 1.17 1.15
Quick ratio 0.59 0.43 0.42 0.44 0.52 0.50 0.56 0.55 0.48 0.45 0.46 0.45 0.42 0.39 0.42 0.40 0.39 0.32 0.32 0.31
Cash ratio 0.28 0.22 0.19 0.23 0.27 0.26 0.27 0.26 0.23 0.24 0.19 0.23 0.21 0.18 0.20 0.20 0.21 0.16 0.13 0.13

Paychex Inc's liquidity ratios show varying levels of liquidity over the past few quarters. The current ratio, which measures the company's ability to cover short-term obligations with its current assets, has generally been above 1, indicating a healthy level of liquidity. However, it has fluctuated slightly over the periods, ranging from 1.15 to 1.37.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has been lower than the current ratio, indicating a more conservative assessment of liquidity. The quick ratio has also shown fluctuations, ranging from 0.31 to 0.59, with the latest value at 0.43.

The cash ratio, representing the ability to cover current liabilities with cash and cash equivalents, has displayed a similar pattern of fluctuation, with values ranging from 0.13 to 0.28. This ratio shows a tighter liquidity position, as it considers only the most liquid assets.

Overall, Paychex Inc's liquidity ratios suggest that the company has maintained a generally stable liquidity position over the periods analyzed, with the current and quick ratios indicating adequate liquidity levels to meet its short-term obligations. However, the downward trend in the quick ratio and cash ratio in recent periods warrants further monitoring to ensure continued liquidity stability.


Additional liquidity measure

May 31, 2024 Feb 29, 2024 Nov 30, 2023 Aug 31, 2023 May 31, 2023 Feb 28, 2023 Nov 30, 2022 Aug 31, 2022 May 31, 2022 Feb 28, 2022 Nov 30, 2021 Aug 31, 2021 May 31, 2021 Feb 28, 2021 Nov 30, 2020 Aug 31, 2020 May 31, 2020 Feb 29, 2020 Nov 30, 2019 Aug 31, 2019
Cash conversion cycle days 86.66 95.90 1,480.06 1,467.24 1,141.94 73.95 83.20 83.70 75.89 66.80 1,220.07 1,166.69 1,170.33 1,333.62 1,082.75 1,033.44 1,045.36 1,348.24 1,183.08 1,206.74

The cash conversion cycle of Paychex Inc, as reflected in the data provided, has exhibited significant fluctuations over the past several periods. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

It is notable that the cash conversion cycle for Paychex Inc has ranged from as low as 66.80 days to as high as 1,480.06 days, indicating a wide variation in the efficiency of managing its working capital and operating cycle. The company experienced particularly extreme cycles in the periods ending Nov 30, 2023, and Nov 30, 2021, where the cycle was abnormally long.

A shorter cash conversion cycle is generally preferred as it signifies that the company is efficient in managing its working capital, converting inventory into sales, and ultimately into cash more rapidly. Conversely, a longer cycle suggests inefficiencies or delays in the conversion process, potentially tying up capital and affecting liquidity.

It would be crucial for Paychex Inc to analyze the underlying reasons for the significant fluctuations in its cash conversion cycle and to implement strategies to streamline its working capital management processes. By enhancing efficiency in managing its cash conversion cycle, the company can improve its cash flow generation and overall financial performance.