Signet Jewelers Ltd (SIG)

Signet Jewelers Ltd's liquidity ratios indicate the company's ability to meet its short-term obligations. The current ratio, which measures the company's ability to pay off its current liabilities with its current assets, has shown fluctuations over the period analyzed. It peaked at 2.58 in August 2020 but has since trended downwards to 1.48 in February 2025. This downward trend suggests a potential strain on the company's short-term liquidity position.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also exhibited variability over time but generally followed a decreasing trend. It was highest at 0.99 in August 2020 and hit its lowest point at 0.14 in November 2024. The declining quick ratio indicates that Signet Jewelers may have difficulty meeting its short-term obligations without relying on inventory as a liquid asset.

The cash ratio, which is the most stringent liquidity ratio as it only considers cash and cash equivalents, shows a similar pattern of fluctuations in Signet Jewelers' liquidity position. The cash ratio ranged from 0.10 in November 2024 to 0.86 in July 2021, with a general decreasing trend over time. This suggests that the company may have limited cash reserves to cover its immediate liabilities.

Overall, Signet Jewelers Ltd's liquidity ratios indicate a declining trend in its ability to meet short-term obligations, with the current ratio, quick ratio, and cash ratio all showing a decrease over the period analyzed. This may raise concerns about the company's liquidity position and its ability to manage short-term financial obligations effectively.

---

Additional liquidity measure

Signet Jewelers Ltd's cash conversion cycle has shown fluctuations over the past few years. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory into cash flows from sales. From May 2, 2020, to August 1, 2020, the cash conversion cycle increased from 163.86 days to 169.66 days. This indicated a longer period for Signet Jewelers Ltd to convert its inventory into cash.

However, the company improved its efficiency in managing its cash conversion cycle from August 1, 2020, to January 29, 2022. The cycle decreased steadily from 169.66 days to 62.36 days by January 29, 2022. This reduction showcased the company's ability to optimize its inventory management and collection processes more effectively.

Subsequently, from February 1, 2025, the cash conversion cycle decreased further to 53.39 days. This improvement may indicate enhanced inventory turnover and quicker cash conversion, suggesting better operational efficiency and effective management of working capital.

Overall, fluctuations in Signet Jewelers Ltd's cash conversion cycle indicate changes in its operational efficiency in inventory management and collection practices. Despite some fluctuations, the trend towards a shorter cash conversion cycle is generally positive as it signifies improved efficiency in working capital management.