Scholastic Corporation (SCHL)

The liquidity position of Scholastic Corporation, as reflected through its various ratios over the analyzed period, demonstrates some notable trends and fluctuations.

Beginning with the current ratio, which measures the company's ability to meet short-term obligations with current assets, the data indicates a somewhat declining trend from a high of 2.06 as of May 31, 2020, to a lower level around 1.20 as of February 29, 2024. The current ratio generally remained above 1.4 through much of 2020 and early 2021 but experienced a gradual decline thereafter, reaching its lowest point in early 2024 before a slight uptick to 1.27 in May 2024. This suggests that while the company's short-term liquidity remains sufficient to cover current liabilities, its buffer has diminished over time, indicating tightening liquidity conditions.

The quick ratio, which excludes inventories from current assets for a more stringent evaluation of liquidity, shows a more pronounced decline over the period. Starting at 1.44 in May 2020, it declined significantly to below 1.0 around February 2021 and remained relatively low for most of 2021 and 2022, with fluctuations. Notably, a marked increase was observed at May 31, 2023, reaching 1.50, indicating a temporary improvement in liquid assets excluding inventories. However, this ratio reverted to sub-1 levels in subsequent periods, descending to approximately 0.68 by August 2024, which points to a reduced ability to meet short-term obligations with the most liquid assets alone.

The cash ratio, which considers only cash and cash equivalents relative to current liabilities, has shown more volatility and an overall declining trend over the analyzed timeframe. It started at 0.79 in May 2020, gradually decreased to lows below 0.20 in late 2023 and early 2024, reflecting a significant decline in cash holdings relative to current liabilities. The ratio saw brief increases, such as reaching 0.66 in May 2023, yet remained below 0.3 in most subsequent periods, indicating that cash on hand is relatively limited compared to current liabilities.

Overall, the liquidity ratios collectively illustrate a pattern of weakening liquidity metrics for Scholastic Corporation over this period. While the current ratio remains above unity, indicating the company can generally meet short-term liabilities, the declining trends in quick and cash ratios suggest a diminishing buffer of liquid assets, potentially signaling increased liquidity risk. This trend warrants ongoing monitoring to assess whether the company can sustain its short-term financial health amidst these changes.

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Additional liquidity measure

The analysis of Scholastic Corporation's cash conversion cycle (CCC) over the period from May 2020 through February 2025 demonstrates notable fluctuations that reflect changes in the company's operating efficiencies and working capital management.

Initially, in May 2020, the CCC stood at approximately 137.81 days, indicating the average duration for converting investments in inventory and receivables into cash was relatively moderate. The cycle experienced an upward trend through the subsequent periods, reaching its peak at approximately 202.68 days in February 2021, which marked an extended period of over six and a half months. This increase suggests a slowdown in the company's ability to swiftly convert inventory and receivables into cash, potentially due to increased operational inefficiencies or shifts in industry demand.

Following this peak, there was a notable reduction in the CCC, dropping to around 136.60 days by August 2021, signaling improvements in inventory management, receivables collection, or both. Over the remaining periods up to November 2022, fluctuations persisted, with the CCC oscillating between roughly 129.26 days and 154.30 days. The lowest recorded value within this timeframe was approximately 129.26 days in May 2022, indicating a period of enhanced cash conversion efficiency.

From late 2022 into early 2024, the CCC stabilized somewhat, hovering around 139 days, with minor variations. Notably, there was a slight decrease to approximately 119.84 days in May 2024, which could imply further operational improvements or shifts in credit policies and inventory turnover. However, the cycle increased again to approximately 144.76 days by February 2025, suggesting some deterioration or adjustment in working capital strategies.

Overall, the company's CCC exhibits a cyclical pattern characterized by periods of extension and contraction. The earlier peaks reflect periods of slower cash conversion, while the reductions indicate strategic or operational refinements aimed at improving liquidity and working capital management. The recent trend shows an inclination toward efficiency, although the cycle remains somewhat susceptible to fluctuations, highlighting the importance of ongoing management focus on inventory and receivables turnover to sustain optimal cash conversion performance.