Sally Beauty Holdings Inc (SBH)

The liquidity ratios of Sally Beauty Holdings Inc reflect its ability to meet short-term obligations and fund its ongoing operations. The current ratio, which measures the company's ability to pay off short-term liabilities with its current assets, has fluctuated over the past five years, from a high of 2.55 in 2019 to a low of 1.70 in 2022. The ratio has shown an improving trend in the most recent year, reaching 2.12 as of September 30, 2023, indicating a stronger capacity to cover short-term obligations.

In contrast, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has exhibited greater variability. The ratio has steadily declined from 1.10 in 2020 to 0.29 in 2022 before rebounding to 0.44 in 2023. This suggests a decrease in the company's ability to meet its short-term obligations with its most liquid assets.

Furthermore, the cash ratio, which specifically assesses the company's ability to cover short-term liabilities with its cash and cash equivalents, has displayed similar trends as the quick ratio. It decreased from 1.00 in 2020 to 0.19 in 2022 and then improved to 0.31 in 2023.

These liquidity ratios indicate that while Sally Beauty Holdings Inc has shown strength in its current assets to cover short-term obligations, there is a need for closer attention to its quick and cash ratios to ensure that the company maintains a robust liquidity position in the future.

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Additional liquidity measure

The cash conversion cycle of Sally Beauty Holdings Inc has shown a fluctuating trend over the past five years. The cycle increased from 123.18 days in 2020 to 134.07 days in 2022, indicating a potential inefficiency in managing its cash flow. However, there was a subsequent improvement in 2023, with the cycle decreasing to 150.31 days.

The increase in the cash conversion cycle from 2020 to 2022 suggests a potential delay in converting inventory into cash, or an extension in the time taken to collect receivables. This could be a concerning sign for the company's liquidity and working capital management.

It's important for Sally Beauty Holdings Inc to closely monitor its cash conversion cycle and identify the factors contributing to the fluctuations in order to optimize its operations and strengthen its cash flow position.