Perdoceo Education Corp (PRDO)

Perdoceo Education Corp's liquidity ratios indicate its ability to meet its short-term obligations effectively.

1. Current Ratio: The current ratio measures the company's ability to pay its short-term obligations with its current assets. Perdoceo Education Corp's current ratio has shown a decreasing trend from 4.50 in 2020 to 3.52 in 2022, before increasing to 5.90 in 2023 and then slightly decreasing to 4.84 in 2024. While the current ratio remains above 1, indicating the company's ability to cover its short-term liabilities, the decreasing trend raises some concerns about its liquidity position.

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. Perdoceo's quick ratio follows a similar trend as the current ratio, starting at 3.91 in 2020, decreasing to 3.11 in 2022, and then increasing significantly to 8.78 in 2024. The quick ratio's improvement in 2023 and 2024 suggests that the company has a stronger ability to meet its immediate obligations without relying on inventory.

3. Cash Ratio: The cash ratio focuses solely on the company's ability to cover its short-term liabilities with cash and cash equivalents. Perdoceo Education Corp's cash ratio mirrors the quick ratio trend, indicating a healthy level of cash reserves relative to its short-term obligations. The cash ratio shows a consistent and significant increase from 3.91 in 2020 to 8.78 in 2024, reflecting a strong liquidity position and the company's ability to meet its short-term financial commitments with cash on hand.

In summary, Perdoceo Education Corp's liquidity ratios demonstrate mixed trends, with the current ratio slightly decreasing, while the quick and cash ratios show improvements over the years. This suggests that the company has maintained a reasonable liquidity position, with a notable increase in its ability to cover immediate liabilities with cash reserves in recent years.

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Additional liquidity measure

The cash conversion cycle of Perdoceo Education Corp has demonstrated a significant increase over the years. As of December 31, 2020, the company had a relatively efficient cash conversion cycle of 1.95 days, indicating a quick conversion of resources into cash. However, this efficiency declined in the subsequent years. By December 31, 2021, the cash conversion cycle had extended to 3.03 days, and by December 31, 2022, it increased further to 5.95 days.

The trend intensified in the following years, with the cash conversion cycle reaching 14.01 days as of December 31, 2023. This significant elongation suggests delays in converting investments in inventory and accounts receivable into cash inflows. Although there was a slight improvement by December 31, 2024, with the cycle decreasing to 10.23 days, the overall trend indicates a notable slowdown in the company's cash conversion efficiency.

This prolonged cash conversion cycle may indicate potential inefficiencies in managing working capital, such as inventory levels, accounts receivable collection, or payment terms with suppliers. It is crucial for Perdoceo Education Corp to address these challenges to optimize its cash flow and enhance overall financial performance.