Simply Good Foods Co (SMPL)

Sure, based on the provided data, I can provide a comprehensive analysis of the liquidity ratios of Simply Good Foods Co.

Current Ratio:
The current ratio shows the company's ability to pay short-term obligations with its short-term assets. A higher current ratio indicates a better ability to cover short-term liabilities.

Simply Good Foods Co's current ratio has been consistently strong over the past five years, ranging from 2.63 to 4.14. This suggests that the company has a sufficient level of current assets to cover its short-term liabilities. The current ratio has been showing an increasing trend, indicating an improvement in the company's ability to meet its short-term obligations.

Quick Ratio:
The quick ratio, also known as the acid-test ratio, measures the company's ability to meet short-term obligations with its most liquid assets, excluding inventory.

Simply Good Foods Co's quick ratio has also been consistently strong over the past five years, ranging from 1.77 to 2.84. This indicates that the company has a good level of highly liquid assets to cover its short-term liabilities, even after excluding inventory. Similar to the current ratio, the quick ratio has shown an increasing trend, signifying a strengthening ability to meet short-term obligations.

Cash Ratio:
The cash ratio measures the company's ability to cover short-term liabilities with its cash and cash equivalents alone.

Simply Good Foods Co's cash ratio has been strong over the years, although it is lower compared to the current and quick ratios. The cash ratio has ranged from 0.79 to 1.22, indicating that the company has enough cash to cover a portion of its short-term liabilities. However, the decreasing trend in the cash ratio over the years suggests that the company's proportion of cash and cash equivalents in relation to its short-term liabilities has been decreasing.

In summary, Simply Good Foods Co has exhibited strong liquidity based on its current, quick, and cash ratios over the past five years, demonstrating its ability to meet short-term obligations. The increasing trend in the current and quick ratios reflects an improving liquidity position, although the decreasing trend in the cash ratio warrants further attention to the company's cash management.

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Additional liquidity measure

The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer CCC indicates that the company's cash is tied up for a longer period, potentially impacting its liquidity and financial flexibility.

Looking at Simply Good Foods Co's CCC over the past five years, we observe a fluctuating trend. In 2019, the CCC was 57.52 days, indicating that the company took approximately 57.52 days to convert its investments in inventory and other resources into cash flows from sales. Over the subsequent years, there was an upward trend in the CCC, reaching 60.01 days in 2020 and 63.46 days in 2021. However, in 2022, there was a marginal increase to 73.40 days, suggesting a slight deterioration in the company's ability to efficiently convert its resources into cash flows.

The most recent data for 2023 shows a modest improvement, with the CCC decreasing to 72.15 days. While this represents a positive change compared to the previous year, the CCC is still higher than in 2019 and 2020, indicating that the company's cash is tied up for a longer period.

It is important to note that an increasing CCC may imply inefficiencies in inventory management, collection of receivables, or longer payment periods to suppliers, all of which can impact the company's working capital and overall financial health. Therefore, Simply Good Foods Co should consider strategies to streamline its cash conversion cycle and enhance its operational efficiency to free up cash and improve its overall financial performance.