Skechers USA Inc (SKX)

The liquidity ratios of Skechers U S A, Inc. provide valuable insights into the company's ability to meet its short-term financial obligations.

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Skechers U S A, Inc. has maintained a relatively stable current ratio over the past five years, ranging from 2.26 in 2022 to 2.76 in 2020. The current ratio for 2023 stands at 2.38, indicating that the company has $2.38 in current assets for every $1 in current liabilities. This is a positive sign as it suggests that the company is in a strong position to meet its short-term obligations.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Skechers U S A, Inc. has shown fluctuations in its quick ratio over the years, with the lowest ratio of 1.13 in 2022 and the highest of 1.92 in 2020. The quick ratio for 2023 is 1.46, indicating that the company has $1.46 in liquid assets available to cover each $1 of current liabilities. This suggests that the company has a sufficient level of liquid assets to meet short-term obligations without relying on selling inventory.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities with its cash and cash equivalents alone. Skechers U S A, Inc. has also demonstrated variability in its cash ratio over the years, with the lowest ratio of 0.55 in 2022 and the highest of 1.35 in 2020. The cash ratio for 2023 is 0.89, indicating that the company has $0.89 in cash and cash equivalents for every $1 of current liabilities. While the cash ratio has improved from the previous year, it suggests that Skechers U S A, Inc. may need to rely on other liquid assets to meet all of its short-term obligations.

In conclusion, based on the current, quick, and cash ratios, Skechers U S A, Inc. appears to have maintained a strong liquidity position over the years, with sufficient assets to cover its short-term financial obligations. However, the variability in these ratios highlights the importance of ongoing monitoring to ensure the company's continued ability to meet its short-term liabilities.

---

Additional liquidity measure

The cash conversion cycle of Skechers U S A, Inc. has exhibited fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased to 92.08 days from 125.76 days in 2022. This indicates that Skechers was able to convert its investments in inventory and accounts receivable into cash more efficiently in 2023 compared to the previous year.

However, when looking at a broader trend, the cash conversion cycle in 2023 was still higher than in 2020 and 2019, which were 96.04 days and 89.69 days, respectively. This suggests that Skechers might have faced challenges in managing its working capital and converting sales into cash as effectively as it did in 2020 and 2019.

Overall, Skechers U S A, Inc. should continue to focus on optimizing its inventory management and accounts receivable collection processes to further reduce its cash conversion cycle and improve its overall efficiency in converting working capital into cash.