Shake Shack Inc (SHAK)

Shake Shack Inc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, exhibit fluctuations over the past five years. The current ratio, which indicates the company's ability to cover short-term liabilities with its current assets, shows a declining trend from 2019 to 2020, followed by an increasing trend until 2021, before decreasing slightly in 2023. This ratio has ranged from a low of 0.88 in 2019 to a high of 3.37 in 2021, indicating varying levels of liquidity over the years.

The quick ratio, also known as the acid-test ratio, measures the ability of a company to meet its short-term obligations with its most liquid assets. Similar to the current ratio, the quick ratio for Shake Shack Inc has fluctuated over the years. It saw a drop in 2020, followed by an increase until 2021, before a slight decrease in 2023. The quick ratio ranged from 0.84 in 2019 to 3.26 in 2021, showing an improvement in the company's liquidity position.

The cash ratio, which is the most stringent measure of liquidity as it considers only the cash and cash equivalents of a company, follows a similar pattern to the other liquidity ratios for Shake Shack Inc. It has shown an upward trend from 2019 to 2021, with slight fluctuations in between. The cash ratio ranged from 0.74 in 2019 to 3.15 in 2021, indicating a significant improvement in the company's ability to cover its short-term obligations with cash on hand.

Overall, Shake Shack Inc has demonstrated varying levels of liquidity over the years, with improvements in its ability to meet short-term obligations, particularly in 2021 compared to 2019. However, there have been fluctuations in the ratios, highlighting the importance of continuously monitoring the company's liquidity position.

---

Additional liquidity measure

The cash conversion cycle of Shake Shack Inc has fluctuated over the past five years. On December 31, 2023, the company's cash conversion cycle was -5.40 days, indicating that Shake Shack converted its inventory into cash within 5.40 days. This represents an improvement from the previous year when the cash conversion cycle was -8.91 days.

In comparison to earlier years, Shake Shack has shown a trend of decreasing its cash conversion cycle, suggesting more efficient management of its working capital. The sharp decrease from -24.46 days in 2020 to -11.44 days in 2021 signifies a significant improvement in the company's ability to convert its resources into cash.

Overall, Shake Shack's negative cash conversion cycle indicates that the company manages to generate cash from its operational activities before having to pay its suppliers, leading to a favorable liquidity position. Continued monitoring of this metric will be essential to assess the company's efficiency in managing its working capital in the future.