PVH Corp (PVH)

PVH Corp's liquidity ratios, including the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.

The current ratio indicates the company's ability to cover its short-term liabilities with its current assets. From May 1, 2022, to February 28, 2025, PVH Corp's current ratio fluctuated between 1.09 and 1.55, with the highest ratio being 1.55 on May 31, 2024. Generally, a current ratio above 1 suggests that the company has sufficient current assets to meet its short-term obligations. PVH Corp's current ratio mostly stayed above 1 throughout the period, indicating a relatively healthy liquidity position.

The quick ratio, which excludes inventory from current assets, provides a more stringent measure of liquidity. PVH Corp's quick ratio ranged from 0.12 to 0.54 during the same period. A quick ratio above 1 is considered favorable, but the company's quick ratio was consistently below 1, indicating a potential dependence on inventory to meet short-term obligations. However, the quick ratio showed some improvement over time, reaching 0.27 on February 28, 2025.

The cash ratio, the most conservative liquidity measure, focuses solely on cash and cash equivalents to cover short-term liabilities. PVH's cash ratio ranged from 0.12 to 0.31 during the period under review. A higher cash ratio is typically preferred as it indicates a stronger ability to cover immediate liabilities with cash on hand. While PVH Corp's cash ratio fluctuated, it generally remained relatively stable over the period.

Overall, PVH Corp's liquidity ratios show a mixed picture. While the current ratio remained mostly above 1, indicating adequate liquidity to cover short-term obligations, the quick ratio and cash ratio suggest room for improvement in managing short-term liquidity risks, particularly in terms of reducing reliance on inventory to meet immediate cash needs.

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Additional liquidity measure

The cash conversion cycle of PVH Corp fluctuated over the period under review. The cycle, which represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales, experienced variations ranging from as low as 62.56 days to as high as 177.86 days.

Analyzing the data, we can observe that the company's efficiency in managing its working capital improved during some periods but deteriorated in others. For instance, in August 2023, the cash conversion cycle spiked to 177.86 days, indicating potential challenges in quickly converting investments into cash. On the other hand, in February 2024, the cycle decreased significantly to 62.56 days, reflecting enhanced efficiency in working capital management.

Overall, a lower cash conversion cycle is generally seen as favorable as it signifies that the company is more adept at efficiently managing its cash flow and working capital. Conversely, a higher cycle may indicate inefficiencies in inventory management, payment collections, or supplier negotiations. PVH Corp should continue to monitor and strive to optimize its cash conversion cycle to ensure smooth operations and financial health.