Simply Good Foods Co (SMPL)

The liquidity ratios of Simply Good Foods Co over the past five years indicate a strong and stable liquidity position.

The current ratio, which measures the company's ability to meet its short-term obligations using its current assets, has shown a positive trend, increasing from 3.64 in 2020 to 4.05 in 2024. This indicates that the company has significantly improved its ability to cover its short-term liabilities with its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Simply Good Foods Co has maintained a consistently healthy quick ratio over the years, ranging from 1.64 in 2021 to 2.61 in 2024. This implies that the company can meet its short-term obligations without relying on the sale of inventory.

The cash ratio reflects the company's ability to cover its current liabilities with cash and cash equivalents alone. Simply Good Foods Co has shown a mixed performance in this ratio, with fluctuations observed over the years. However, the overall trend has been positive, with the cash ratio increasing from 0.66 in 2022 to 1.22 in 2024. This suggests that the company is holding an increasing amount of cash relative to its current liabilities.

Overall, the liquidity ratios of Simply Good Foods Co demonstrate a strong and improving liquidity position, indicating that the company has sufficient liquid assets to meet its short-term obligations. This bodes well for the company's financial stability and ability to navigate challenges in the short term.

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Additional liquidity measure

The cash conversion cycle for Simply Good Foods Co has shown a fluctuating trend over the past five years. In the most recent fiscal year ending August 31, 2024, the company's cash conversion cycle increased to 78.52 days, indicating a longer period for the company to convert its investments in inventory and accounts receivable into cash.

Comparing this to the prior year, where the cash conversion cycle was 72.15 days, we observe a deterioration in the efficiency of the company's working capital management. This suggests that the company may be facing challenges in converting its operating assets into cash within a reasonable timeframe.

Looking further back, the cash conversion cycle was 73.40 days in 2022 and 63.46 days in 2021. These figures show a general increasing trend over the last three years, indicating a potential worsening in the company's ability to manage its cash flow efficiently.

However, it is worth noting that in 2020, the cash conversion cycle was 60.01 days, lower than in subsequent years. This suggests that the company may have implemented certain strategies or improvements in its working capital management during that period.

Overall, the increasing trend in the cash conversion cycle for Simply Good Foods Co over the past five years highlights the importance of closely monitoring the company's operational efficiency and liquidity management to ensure sustainable financial performance.