Dave & Buster’s Entertainment (PLAY)

Based on the provided data, Dave & Buster’s Entertainment has experienced fluctuating liquidity ratios over the past few years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has shown a decreasing trend from 0.47 in January 2022 to 0.22 in January 2025. This indicates a potential weakening in the company's short-term liquidity position.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also demonstrated a declining pattern, dropping from 0.29 in January 2022 to 0.02 in January 2025. This suggests that Dave & Buster’s may have difficulty meeting its immediate obligations without relying on the sale of inventory.

Furthermore, the cash ratio, which highlights the firm's ability to cover its current liabilities with cash and cash equivalents, has followed a similar downward trajectory, falling from 0.08 in January 2022 to 0.02 in January 2025. This indicates a diminishing ability to settle short-term liabilities solely with cash resources.

Overall, the liquidity ratios of Dave & Buster’s Entertainment have shown a concerning trend of deterioration, raising questions about the company's ability to meet its short-term financial obligations. Investors and stakeholders should closely monitor these ratios to assess the company's liquidity risk and potential need for additional financing.

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Additional liquidity measure

Dave & Buster’s Entertainment cash conversion cycle has fluctuated over the period analyzed. 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. A shorter cash conversion cycle indicates more efficient management of working capital.

In January 2022, the company had a negative cash conversion cycle of -19.19 days, indicating that they were able to convert inventory into cash rapidly. However, by January 31, 2022, the cycle increased significantly to 66.87 days, suggesting a delay in converting inventory back to cash.

Throughout the following quarters, the cash conversion cycle fluctuated, with periods of improvement and deterioration. For instance, in May 2022, the cycle improved to -9.43 days, reflecting efficient working capital management, while in October 2022, it increased to 55.65 days, indicating potential challenges in converting resources to cash.

By January 2023, the cycle improved again to -40.72 days, signaling efficient cash flow management. However, fluctuations continued, with the cycle varying between positive and negative days over the subsequent quarters.

Overall, Dave & Buster’s Entertainment's cash conversion cycle has shown variability, with the company experiencing periods of both efficient and ineffective working capital management. It is essential for the company to focus on optimizing inventory turnover and cash collections to enhance its overall financial performance.