Patterson Companies Inc (PDCO)

The liquidity ratios of Patterson Companies Inc, as shown in the table, reflect the company's ability to meet its short-term financial obligations.

The current ratio measures the company's ability to cover its current liabilities with its current assets. Over the past five years, Patterson Companies Inc's current ratio has fluctuated, ranging from 1.33 to 1.65. A current ratio above 1 indicates that the company has more current assets than current liabilities, implying a stronger ability to meet short-term obligations. While the current ratio has been relatively stable, the downward trend from the peak in 2022 to 2024 raises potential concerns about the company's liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. Patterson Companies Inc's quick ratio has ranged from 0.46 to 0.59 over the past five years. A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on selling inventory. The decreasing trend in the quick ratio from 2022 to 2024 may indicate potential challenges in meeting immediate cash needs without relying on inventory conversion.

The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents alone, offering the most conservative assessment of liquidity. Patterson Companies Inc's cash ratio has ranged from 0.07 to 0.15 over the past five years. A low cash ratio indicates a limited ability to cover short-term liabilities solely with cash on hand. The declining trend in the cash ratio suggests a decreasing ability to meet short-term obligations with cash reserves alone.

Overall, while Patterson Companies Inc has shown some variability in its liquidity ratios over the past five years, the declining trends in the quick ratio and cash ratio from 2022 to 2024 may raise concerns about the company's short-term liquidity position. It is essential for investors and stakeholders to monitor these ratios closely to assess the company's ability to meet its financial obligations going forward.

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Additional liquidity measure

The cash conversion cycle of Patterson Companies Inc has exhibited some fluctuations over the past five years. In the most recent fiscal year ending April 27, 2024, the company's cash conversion cycle stood at 33.05 days, slightly higher than the prior year's figure of 31.94 days. This indicates that, on average, it took Patterson Companies Inc 33.05 days to convert its investments in inventory and other resources into cash from sales during the latest fiscal year.

Comparing the data over the last five years, we can observe some variability in the cash conversion cycle. The cycle was relatively stable around 32-33 days in fiscal years 2024, 2023, and 2022. However, it spiked to 37.62 days in fiscal year 2021 before decreasing to 23.45 days in fiscal year 2020.

A lower cash conversion cycle is generally considered favorable as it implies that the company is able to efficiently convert its investments in inventory into cash. Conversely, a higher cash conversion cycle may indicate inefficiencies in inventory management, collection of receivables, or payment of payables.

It would be important for Patterson Companies Inc to analyze the factors contributing to the fluctuations in its cash conversion cycle and implement strategies to optimize working capital management and improve overall cash flow efficiency.