Sprouts Farmers Market LLC (SFM)

The liquidity ratios of Sprouts Farmers Market LLC have shown some fluctuations over the years.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, increased from 0.94 in December 2020 to 1.29 in December 2022, indicating an improvement in liquidity. However, it decreased to 0.99 by December 2024, which may signal a potential decrease in the company's short-term financial health.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. It increased from 0.34 in December 2020 to 0.56 in December 2022, suggesting an enhanced ability to meet short-term obligations. However, it slightly decreased to 0.39 by December 2024, which could indicate a reduced capacity to cover immediate liabilities.

The cash ratio, which assesses the company's ability to cover its current liabilities with its cash and cash equivalents, followed a similar trend to the quick ratio, reflecting an improvement from 0.34 in December 2020 to 0.56 in December 2022, before dropping to 0.39 by December 2024.

Overall, the liquidity ratios of Sprouts Farmers Market LLC show a mixed performance over the years, with improvements in some areas but potential challenges in others. It is essential for the company to closely monitor these ratios to ensure it maintains a healthy level of liquidity to meet its financial obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Sprouts Farmers Market LLC has shown a gradual increase over the years based on the provided data. Starting at 22.69 days on December 31, 2020, it has steadily risen to 24.90 days by the end of 2021, further increasing to 27.95 days by December 31, 2022. Although there was a slight decrease to 27.34 days on December 31, 2023, the cycle remains relatively high. By the end of 2024, the cash conversion cycle stands at 26.23 days.

This trend suggests that the company is taking longer to convert its investments in inventory into cash receipts from sales. A longer cash conversion cycle may indicate inefficiencies in managing its operating cycle, which comprises the time it takes to sell inventory, collect receivables, and pay suppliers. It is essential for the company to closely monitor and manage its cash conversion cycle to optimize working capital efficiency and overall financial performance.