Scotts Miracle-Gro Company (SMG)
Quick ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash | US$ in thousands | 31,900 | 86,800 | 244,100 | 16,600 | 18,800 |
| Short-term investments | US$ in thousands | — | 117,000 | 207 | — | — |
| Receivables | US$ in thousands | 304,200 | 299,000 | 483,400 | 474,800 | 223,900 |
| Total current liabilities | US$ in thousands | 773,700 | 963,900 | 1,140,400 | 950,400 | 620,500 |
| Quick ratio | 0.43 | 0.52 | 0.64 | 0.52 | 0.39 |
September 30, 2023 calculation
Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($31,900K
+ $—K
+ $304,200K)
÷ $773,700K
= 0.43
The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It is calculated by dividing the sum of cash, cash equivalents, and accounts receivable by current liabilities.
The trend in Scotts Miracle-Gro Company's quick ratio from 2019 to 2023 shows fluctuations. In 2019, the quick ratio was 0.81, indicating that the company had $0.81 of liquid assets available to cover each dollar of its current liabilities. However, this ratio decreased to 0.63 in 2020, indicating a potential liquidity constraint. In 2021, the quick ratio improved to 0.79, suggesting a slight alleviation of the liquidity concerns. However, in 2022 and 2023, the quick ratio remained relatively stable at 0.66 and 0.67, respectively.
While these ratios are below the ideal threshold of 1.0, indicating potential difficulty in meeting short-term obligations, it is important to consider the nature of Scotts Miracle-Gro Company's business. The company may have valuable inventory, which is not included in the quick ratio calculation, and its accounts receivable may also represent the successful extension of credit to customers. Therefore, a low quick ratio may not necessarily indicate financial distress.
In conclusion, while the quick ratio for Scotts Miracle-Gro Company has shown some variability in recent years, it has generally remained below the desired benchmark of 1.0. However, the company's overall liquidity position should be assessed in conjunction with other financial metrics and contextual industry factors to provide a more comprehensive analysis of its short-term financial health.
Peer comparison
Sep 30, 2023