Toro Co (TTC)

The liquidity ratios of Toro Co, as represented by the current ratio, quick ratio, and cash ratio, reflect the company's ability to meet its short-term obligations and financial flexibility.

The current ratio measures the company's ability to cover its short-term liabilities with its current assets. From 2020 to 2024, Toro Co's current ratio has been fluctuating between 1.58 and 1.90, with a slight decrease in 2024 to 1.81. Despite this decrease, the company generally maintains a current ratio above 1, indicating that it has more than enough current assets to cover its short-term liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Toro Co's quick ratio has shown volatility over the past five years, ranging from 0.49 to 0.89. In 2024, the quick ratio decreased to 0.68, signaling a potential liquidity strain compared to the previous year. A quick ratio below 1 suggests that the company may have difficulty meeting its immediate obligations without relying on inventory sales.

The cash ratio reflects the company's ability to cover its short-term liabilities with its cash and cash equivalents alone. Over the past five years, Toro Co's cash ratio has declined from 0.58 in 2020 to 0.20 in 2024. A cash ratio below 1 indicates that the company may need to rely on other current assets or sources of liquidity to meet its obligations.

Overall, while Toro Co has generally maintained acceptable levels of liquidity as indicated by the current ratio being above 1, the decreasing trend in the quick ratio and cash ratio warrants further monitoring. The management should continue to focus on optimizing its liquidity position to ensure that it can efficiently meet its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Toro Co has fluctuated over the past five years, indicating changes in the efficiency of its cash management and working capital. In 2024, the cash conversion cycle decreased to 88.98 days compared to the previous year at 90.83 days. This suggests that the company took slightly less time to convert its investments in inventory and receivables into cash during the most recent period.

Looking further back, in 2023, the cash conversion cycle was higher at 90.83 days compared to 70.51 days in 2022. This increase indicates that Toro Co took longer to convert its working capital into cash in the prior year. However, there was improvement from 2021 when the cash conversion cycle was 53.57 days, showing the company was more efficient in managing its cash conversion during that period.

In 2020, the cash conversion cycle was 63.90 days, which was higher compared to the subsequent years, indicating that the company took longer to convert its working capital into cash during that period.

Overall, Toro Co's cash conversion cycle has shown variability over the years, potentially influenced by factors such as inventory management, accounts receivable collection, and accounts payable payment practices. Monitoring and managing the cash conversion cycle is crucial for ensuring efficient cash flow operations and optimizing working capital management.