Signet Jewelers Ltd (SIG)

Signet Jewelers Ltd's liquidity ratios show a mixed trend over the years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has been relatively stable, ranging from 1.48 to 1.80. This indicates that the company has enough current assets to meet its short-term obligations.

However, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, shows a declining trend from 0.53 to 0.71. This could suggest that Signet Jewelers may have some difficulty meeting its short-term liabilities without relying on inventory.

The cash ratio, which is the most conservative measure of liquidity, also shows a decreasing trend from 0.33 to 0.70. This indicates that the company's ability to pay off its current liabilities solely with cash and cash equivalents has weakened over the years.

Overall, while Signet Jewelers has a reasonable current ratio, the declining trend in the quick ratio and cash ratio signals a potential concern regarding the company's liquidity position. Investors and stakeholders may want to closely monitor these ratios to assess the company's ability to meet its short-term obligations.

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Additional liquidity measure

Signet Jewelers Ltd's cash conversion cycle has shown a fluctuating trend over the past five years. As of February 1, 2025, the cash conversion cycle stands at 53.39 days. This indicates the number of days it takes for the company to convert its investments in inventory into cash received from customers. A decreasing trend in the cash conversion cycle from 78.60 days on January 30, 2021, to 53.39 days on February 1, 2025, suggests that the company has been managing its working capital more efficiently.

A lower cash conversion cycle generally signifies that Signet Jewelers Ltd is efficiently managing its inventory, collecting receivables promptly, and paying its payables at a slower rate. This can lead to improved liquidity, reduced working capital requirements, and potentially higher profitability.

However, it is essential for the company to maintain an optimal balance in its cash conversion cycle. While a shorter cycle is favorable, an excessively low cycle may indicate aggressive policies that could impact supplier relationships or compromise future growth opportunities. Overall, Signet Jewelers Ltd's decreasing trend in the cash conversion cycle reflects improved operational efficiency in managing its cash flows.