PriceSmart Inc (PSMT)

Cash ratio

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Cash and cash equivalents	US$ in thousands	239,984	237,710	202,060	299,481	102,653
Short-term investments	US$ in thousands	91,081	11,160	50,233	46,509	17,045
Total current liabilities	US$ in thousands	634,477	579,456	533,552	568,275	407,454
Cash ratio		0.52	0.43	0.47	0.61	0.29

August 31, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($239,984K + $91,081K) ÷ $634,477K
= 0.52

The cash ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities using only its cash and cash equivalents. A higher cash ratio indicates a stronger liquidity position, as it means the company has more cash on hand to cover its short-term obligations.

Based on the data provided for Pricesmart Inc., we can see that the cash ratio has fluctuated over the past five years. In 2019, the cash ratio was 0.37, indicating that Pricesmart Inc. had $0.37 of cash and cash equivalents for every $1 of current liabilities. This suggests a relatively weaker liquidity position and potential difficulty in meeting short-term obligations using only cash reserves.

However, in 2020, the cash ratio improved to 0.66, indicating a significant increase in the company's ability to cover its short-term liabilities with cash and cash equivalents. This improvement suggests a stronger liquidity position for Pricesmart Inc. in that year.

In the subsequent years, the cash ratio remained above 0.50, indicating that Pricesmart Inc. continued to maintain a relatively strong ability to meet its short-term obligations using its cash reserves. The cash ratio for 2023 was 0.61, showing a slight decrease from the previous year but still indicating a favorable liquidity position.

Overall, the trend in Pricesmart Inc.'s cash ratio suggests that the company has managed to maintain a relatively strong liquidity position over the past five years, with the ability to cover its short-term liabilities with its cash and cash equivalents. However, it is essential to note that the cash ratio should be analyzed in conjunction with other liquidity and solvency ratios to gain a more comprehensive understanding of the company's financial health.