Planet Fitness Inc (PLNT)

The liquidity ratios of Planet Fitness Inc over the past five years indicate the company's ability to meet its short-term financial obligations.

1. Current Ratio:
- The current ratio has shown a decreasing trend from 2019 to 2023, indicating a decrease in the company's ability to cover its short-term liabilities with its current assets.
- While a current ratio above 1 indicates the company can meet its short-term obligations, the downward trend suggests a shift in the company's liquidity position, raising concerns about its ability to handle immediate financial obligations.

2. Quick Ratio:
- Similarly, the quick ratio has followed a declining trend over the five-year period, indicating a reduction in the company's ability to cover its current liabilities without relying on inventory.
- A quick ratio above 1 is considered healthy, but the decreasing trend in this ratio suggests a potential strain on the company's ability to meet immediate obligations without relying on inventory, which may impact its liquidity position.

3. Cash Ratio:
- The cash ratio, representing the most stringent measure of liquidity, has also decreased over the years, indicating a decline in the proportion of the company's current liabilities that can be covered by its cash and cash equivalents.
- A cash ratio above 1 is typically seen as positive, but the decreasing trend suggests that the company may have relatively less cash available to meet its short-term obligations directly, which could signal liquidity challenges.

In conclusion, the decreasing trends in the current ratio, quick ratio, and cash ratio imply a potential deterioration in Planet Fitness Inc's liquidity position over the past five years. This may raise concerns about the company's ability to meet its short-term financial obligations without sufficient reliance on its current assets and cash reserves. Further analysis and monitoring of the company's liquidity management strategies may be warranted to address these potential liquidity challenges.

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Additional liquidity measure

The cash conversion cycle of Planet Fitness Inc has shown varying trends over the past five years. In 2023, the company's cash conversion cycle improved significantly to -17.54 days, compared to -5.56 days in 2022. This indicates that the company took fewer days to convert its resources into cash during the most recent year.

In 2021, Planet Fitness experienced a sharp decrease in its cash conversion cycle to -68.99 days, following a similar trend in 2020 where the cycle was -62.60 days. These negative values suggest that the company was able to convert its investments, such as inventory or accounts receivable, into cash much faster than in previous years.

In 2019, the cash conversion cycle was also negative at -10.49 days, indicating efficient management of working capital in that year.

Overall, the negative values of the cash conversion cycle for Planet Fitness Inc over these years reflect effective management in terms of converting investments into cash quickly, highlighting the company's ability to efficiently manage its working capital.