Texas Roadhouse Inc (TXRH)

The liquidity ratios of Texas Roadhouse Inc have fluctuated over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, declined from 1.01 in 2020 to 0.48 in 2023. This may indicate a potential strain on the company's liquidity position in the most recent year.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also showed a decreasing trend from 0.91 in 2020 to 0.38 in 2023. This suggests that Texas Roadhouse Inc may have had difficulties meeting its short-term obligations without relying on inventory in the latest year.

The cash ratio, which focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents, fluctuated between 0.14 and 0.72 over the five-year period. The declining trend in the cash ratio may indicate that the company has struggled to maintain a sufficient level of cash to cover its immediate obligations.

Overall, the downward trend in all three liquidity ratios suggests that Texas Roadhouse Inc may be facing challenges in maintaining its short-term liquidity position. It is essential for the company to closely monitor its liquidity levels and take appropriate measures to ensure it can meet its financial obligations in a timely manner.

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Additional liquidity measure

The cash conversion cycle of Texas Roadhouse Inc has shown fluctuations over the past five years, indicating changes in the efficiency of the company's cash management and operations.

In 2023, the cash conversion cycle decreased to 5.65 days from 6.80 days in 2022, which suggests an improvement in the company's ability to convert its investments in inventory into cash. This indicates that Texas Roadhouse Inc is managing its inventory effectively and collecting receivables efficiently.

Compared to 2021 when the cash conversion cycle was 9.43 days, the current cycle of 5.65 days reflects a more efficient operation. This reduction indicates that the company has been able to speed up the collection of receivables or extended the payment period to suppliers, thereby enhancing its overall cash flow management.

However, in 2020 and 2019, Texas Roadhouse Inc had negative cash conversion cycles of -0.40 days and -0.29 days, respectively. A negative cash conversion cycle suggests that the company is able to collect cash from customers before paying its suppliers. While this can be advantageous in terms of cash management, it may also indicate aggressive customer credit policies or delayed payments to suppliers, which could have implications on relationships with stakeholders.

Overall, the decreasing trend in the cash conversion cycle for Texas Roadhouse Inc in recent years indicates a positive development in the company's operational efficiency and cash flow management. Continued monitoring of this metric will be essential to ensure sustainable and optimal cash conversion practices in the future.