Paylocity Holdng (PCTY)

The liquidity ratios of Paylocity Holding have exhibited fluctuations over the past five years.

1. Current Ratio: The current ratio measures the company's ability to meet short-term obligations with its current assets. Paylocity Holding's current ratio has ranged from 1.03 to 1.18 over the five-year period, with the highest value observed in 2020. This indicates that the company has generally had an adequate level of current assets to cover its short-term liabilities, although there was a slight decline in the ratio in 2022.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Paylocity Holding's quick ratio has ranged from 0.04 to 0.21 over the five-year period. The ratio remained low in 2022 but improved in the following years, indicating the company's ability to meet its short-term obligations with its most liquid assets.

3. Cash Ratio: The cash ratio specifically focuses on the company's ability to cover its current liabilities with cash and cash equivalents. Paylocity Holding's cash ratio has ranged from 0.03 to 0.20 over the five-year period. The ratio was at its lowest in 2022 but showed improvement in the subsequent years, reflecting an increase in the company's ability to cover current liabilities with cash holdings.

Overall, Paylocity Holding's liquidity ratios suggest that while there have been fluctuations, the company has generally maintained a satisfactory level of liquidity to meet its short-term obligations. Management should continue to monitor these ratios to ensure ongoing liquidity and financial stability.

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Additional liquidity measure

The cash conversion cycle for Paylocity Holdng has shown significant fluctuations over the past five years. In 2024, the company's cash conversion cycle was 3.29 days, indicating an efficient management of cash, inventory, and accounts receivable. This represents a significant improvement from the previous year where the cash conversion cycle was exceptionally high at 2,687.55 days in 2023, suggesting inefficiencies in the company's cash flow management.

In 2022, the cash conversion cycle improved to 1.76 days, reflecting a more streamlined process in converting sales into cash. However, in 2021 and 2020, the company experienced higher cash conversion cycles of 2,917.95 days and 2,592.14 days respectively, indicating that Paylocity Holdng faced challenges in efficiently managing its working capital.

Overall, the trend in the cash conversion cycle for Paylocity Holdng highlights fluctuations in the management of cash, inventory, and receivables over the past five years. It is crucial for the company to focus on optimizing its cash conversion cycle to enhance liquidity and operational efficiency.