Ross Stores Inc (ROST)

Ross Stores Inc's liquidity ratios have shown consistency and improvement over the past five years.

The current ratio has generally been healthy, ranging from 1.27 in February 2020 to 1.90 in January 2023. This indicates that the company has a sufficient level of current assets to cover its current liabilities. However, there was a slight decrease from 1.90 in 2023 to 1.77 in 2024. Nevertheless, the current ratio remains above 1, suggesting the company has a strong ability to meet its short-term obligations.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown a positive trend. It ranged from 0.54 in February 2020 to 1.29 in January 2023. The ratio further improved to 1.20 in 2024. This indicates that Ross Stores has a sufficient quick asset base to cover its current liabilities without relying on selling inventory.

The cash ratio, which is the most stringent measure of liquidity as it only considers cash and cash equivalents, also reflects strong liquidity for Ross Stores Inc. The cash ratio ranged from 0.50 in February 2020 to 1.25 in January 2023. The ratio in 2024 remained strong at 1.16. This suggests that the company has a solid ability to meet its short-term liabilities using only its cash and equivalents.

Overall, the trend in Ross Stores Inc's liquidity ratios indicates a consistent and improving liquidity position, with the company maintaining a healthy ability to meet its short-term obligations. This suggests a strong financial health and ability to manage its liquidity effectively.

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See also:

Ross Stores Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Ross Stores Inc has been somewhat volatile over the past five years, ranging from negative days in 2022 to positive days in 2020. The cash conversion cycle indicates the time it takes for a company to convert its investments in inventory into cash flows from sales. In 2024, Ross Stores Inc had a cash conversion cycle of 7.10 days, which suggests that the company takes just over a week to turn its inventory investments into cash.

Compared to the previous year, the cash conversion cycle increased from 3.14 days in 2023 to 7.10 days in 2024, indicating a possible slowdown in the conversion of inventory into cash. The negative cash conversion cycle in 2022 (-0.11 days) is an anomaly and may indicate efficient management of working capital, where the company was able to collect cash from sales before paying its suppliers. On the other hand, the positive cash conversion cycles seen in 2020 and 2021 suggest that the company took longer to convert its investments in inventory into cash during those years.

Overall, fluctuations in the cash conversion cycle can provide insights into a company's efficiency in managing working capital, inventory levels, and accounts receivable and payable. In the case of Ross Stores Inc, it is important for the company to monitor and potentially improve its cash conversion cycle to ensure optimal use of resources and liquidity management.