Sally Beauty Holdings Inc (SBH)

Sally Beauty Holdings Inc's liquidity ratios provide insights into its ability to meet short-term financial obligations. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has shown fluctuations over the past five years, ranging from a high of 2.54 in 2020 to a low of 1.70 in 2022. The current ratio has generally been above 2, indicating a healthy liquidity position.

In contrast, the quick ratio, also known as the acid-test ratio, excludes inventory from current assets to provide a more stringent measure of liquidity. Sally Beauty Holdings Inc's quick ratio has shown significant variability, with a low of 0.16 in 2022 and a high of 0.98 in 2020. The decreasing trend in the quick ratio implies a decreasing ability to meet short-term liabilities using only the most liquid assets.

Furthermore, the cash ratio, which measures the company's ability to cover current liabilities with cash and cash equivalents, has also displayed fluctuations over the years. Sally Beauty Holdings Inc's cash ratio has ranged from 0.11 in 2022 to 0.91 in 2020. The decreasing trend in the cash ratio suggests a declining ability to cover short-term obligations solely with cash reserves.

Overall, while Sally Beauty Holdings Inc maintains a relatively strong current ratio above 2, indicating a healthy balance between current assets and liabilities, the decreasing trends in the quick ratio and cash ratio raise concerns about the company's ability to quickly meet its short-term financial obligations with its most liquid assets. These fluctuations suggest the need for closer monitoring and potential adjustments to maintain adequate liquidity levels.

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Additional liquidity measure

The cash conversion cycle of Sally Beauty Holdings Inc has displayed a fluctuating trend over the past five years. In September 2024, the company's cash conversion cycle was 84.75 days, showing a slight increase compared to the previous year. This indicates that on average, it takes the company approximately 84.75 days to convert its investments in inventory and other resources back into cash.

In the preceding year, the cash conversion cycle was slightly lower at 80.08 days, reflecting a shorter time period for the company to convert its resources into cash. However, this trend was reversed in September 2022 when the cash conversion cycle increased to 72.12 days, marking a significant jump in the time taken to convert investments into cash compared to the previous year.

The most efficient year in terms of cash conversion cycle over the last five years was September 2021, where the company only took 64.25 days on average to convert its investments back into cash. This represented a notable improvement in working capital management.

In the earliest period examined, in September 2020, the cash conversion cycle was slightly higher at 68.45 days. Overall, Sally Beauty Holdings Inc has experienced fluctuations in its cash conversion cycle over the past five years, with varying levels of efficiency in managing its working capital and the conversion of resources into cash.