Procter & Gamble Company (PG)

The liquidity ratios of Procter & Gamble (P&G) from June 2020 through March 2025 illustrate a general trend towards slight improvement in liquidity positions over the analyzed period, although the company’s ratios remain relatively modest.

Current Ratio:
The current ratio, which measures a company's ability to cover short-term liabilities with short-term assets, shows a declining trend from a high of 0.85 in June 2020 to a low of 0.56 in December 2022. Subsequently, the ratio gradually increased, reaching approximately 0.71 by March 2025. Throughout the period, the current ratio consistently remained below 1, indicating that P&G generally maintained a liquidity position where current liabilities exceeded current assets. This suggests a relatively tight liquidity buffer, possibly reflecting a strategic reliance on efficient working capital management or a focus on operational efficiency rather than holding large liquidity reserves.

Quick Ratio:
The quick ratio, which excludes inventory from current assets to measure more immediate liquidity, followed a similar downward trajectory from approximately 0.62 in June 2020 to about 0.33 in December 2022. After that period, it exhibited a gradual recovery, improving to about 0.45 by March 2025. The persistent presence of ratios below 1 indicates that a significant portion of current assets is tied up in inventory, which may not be as readily convertible into cash for meeting short-term obligations. Nevertheless, the upward trend in recent years portrays a modest enhancement in short-term liquidity readiness.

Cash Ratio:
The cash ratio, representing the most liquid assets (cash and cash equivalents) relative to current liabilities, experienced a decline from 0.49 in June 2020 to a low of approximately 0.18 in December 2022. Afterward, the ratio displayed an increasing pattern, reaching about 0.27 in March 2025. This indicates that while P&G maintained less than one dollar in cash for each dollar of current liabilities throughout the period, there has been a gradual increase in cash holdings relative to short-term liabilities in recent times. The lower cash ratios suggest reliance on other current assets for liquidity, which may include receivables and inventories, pointing to a strategic preference for operational efficiency over holding large cash reserves.

Summary:
Overall, P&G’s liquidity ratios reflect a conservative approach characterized by manageable short-term liabilities relative to current assets, albeit with ratios consistently below 1, especially in the quick and cash ratios. The gradual improvements in these ratios toward the later period imply efforts at enhancing liquidity positions, potentially to buffer against market uncertainties or to support strategic initiatives. However, the ratios remain indicative of a liquidity profile that favors operational efficiency and asset utilization over extensive cash reserves.

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See also:

Procter & Gamble Company Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The data indicates that Procter & Gamble's cash conversion cycle (CCC) has consistently remained negative over the observed period, reflecting a structure where the company typically receives cash from sales before paying its suppliers. Initially, in June 2020, the CCC was approximately -46.57 days, and this figure exhibited some fluctuations over the subsequent quarters, reaching a low of approximately -53.45 days in June 2021, and a high of around -28.94 days by March 2023.

Throughout the time frame, the CCC has generally oscillated within a range of approximately -28 to -54 days, with occasional increases and decreases but remaining negative overall. Notably, in the latter quarters, the CCC has shown signs of narrowing, with values moving closer to zero, such as -28.94 days in March 2023, indicating a slight decrease in the period during which the company receives cash before disbursing payments.

The persistent negative CCC signifies an efficient working capital cycle, with the company able to convert inventory and receivables into cash faster than it needs to pay its suppliers. This efficiency results in favorable liquidity management and strong cash flow positions. The fluctuations over time may reflect changes in supply chain management, inventory turnover rates, receivables collection periods, or supplier payment terms, but the overall trend remains within a range that underscores Procter & Gamble’s effective working capital management.

In summary, the company's cash conversion cycle remains consistently negative across multiple reporting periods, with minor variations that do not substantially alter its overall liquidity profile. This indicates robust operational efficiency in converting sales into receivables that are collected prior to or concurrent with settling supplier obligations.