Toro Co (TTC)

The liquidity ratios of Toro Co. provide insight into the company's ability to meet its short-term obligations and manage its current assets effectively.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown an improving trend over the past five years, increasing from 1.48 in 2019 to 1.90 in 2023. This indicates that Toro Co. has a strong ability to meet its short-term obligations using its current assets.

The quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also demonstrates an improving trend, albeit with fluctuations. The ratio has increased from 0.62 in 2019 to 0.75 in 2023. Although it remains below 1, indicating potential difficulty in meeting immediate obligations without relying on inventory liquidation, the increasing trend is a positive sign.

The cash ratio, which specifically measures the company's ability to cover its short-term liabilities with its available cash and cash equivalents, has fluctuated over the years but has generally shown a decreasing trend. This suggests that Toro Co.'s reliance on cash to meet its short-term obligations has reduced, potentially indicating more efficient use of other current assets.

Overall, the liquidity ratios of Toro Co. demonstrate a generally improving trend, indicating the company's strengthening ability to meet its short-term obligations. However, the fluctuations in the quick and cash ratios warrant closer attention to ensure continued effective management of current assets.

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Additional liquidity measure

The cash conversion cycle for Toro Co. has exhibited some variability over the past five years. In the most recent period ending October 31, 2023, the cash conversion cycle increased to 113.35 days from 84.19 days in the prior year. This indicates that the company took longer to convert its investments in inventory and receivables into cash during this period.

Looking back at the trend, there was an improvement in the cash conversion cycle from 2020 to 2021, where it decreased from 76.31 days to 61.33 days, signifying a more efficient management of working capital during that time. However, the cycle then increased in 2022 and 2023, suggesting potential challenges in managing cash flow and working capital.

Overall, fluctuations in the cash conversion cycle highlight the company's effectiveness in managing its inventory, receivables, and payables. It is essential for Toro Co. to closely monitor and improve its cash conversion cycle to ensure optimal utilization of its resources and sustained financial performance.