Victoria's Secret & Co (VSCO)

Based on the provided data, let's analyze the liquidity ratios of Victoria's Secret & Co:

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term obligations with its current assets.
- Victoria's Secret & Co had a current ratio of 1.10 on both January 28 and 31 in 2023, indicating that it had $1.10 in current assets for every $1 in current liabilities.
- However, the current ratio decreased to 0.95 by January 31, 2024, suggesting a potential strain on the company's short-term liquidity.
- The ratio remained at 0.95 by February 3, 2024, and improved slightly to 1.05 by January 31, 2025, but it is still below the ideal ratio of 2 or higher, indicating some liquidity concerns.

2. Quick Ratio (Acid-Test Ratio):
- The quick ratio is a more stringent measure of liquidity that excludes inventory from current assets.
- Victoria's Secret & Co had a quick ratio of 0.36 on January 28, 2023, but it dropped significantly to 0.17 by January 31, 2024, showing a limited ability to meet short-term obligations without relying on inventory.
- The quick ratio improved slightly to 0.26 by February 3, 2024, and further declined to 0.12 by January 31, 2025, indicating a decreased ability to cover immediate liabilities with liquid assets.

3. Cash Ratio:
- The cash ratio focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents.
- Victoria's Secret & Co had a cash ratio of 0.27 on both January 28 and 31 in 2023, which decreased to 0.17 by January 31, 2024, and remained at the same level by February 3, 2024.
- The cash ratio further declined to 0.12 by January 31, 2025, suggesting a reduced ability to settle short-term obligations with cash alone.

In conclusion, based on the analysis of the liquidity ratios, Victoria's Secret & Co appears to be facing challenges in maintaining optimal levels of liquidity, with decreasing ratios over the years. This could indicate potential difficulties in meeting its short-term financial obligations without relying heavily on inventory or non-cash assets. Further investigation into the company's cash management and working capital practices may be beneficial to address these liquidity concerns.

---

Additional liquidity measure

The cash conversion cycle (CCC) of Victoria's Secret & Co has fluctuated over the years based on the provided data. Starting at 43.72 days on January 28, 2023, it increased significantly to 93.97 days by January 31, 2023. This prolonged cycle indicates the company's challenges in efficiently converting its investments in inventory into cash.

Subsequently, there was a slight improvement as the CCC decreased to 91.41 days by January 31, 2024, but it remained relatively high. The company managed to significantly reduce its CCC to 38.02 days by February 3, 2024, signaling a more effective management of its working capital.

However, by January 31, 2025, the CCC increased again to 88.34 days, suggesting a potential slowdown in the company's ability to collect cash from sales and manage its inventory levels efficiently. Victoria's Secret & Co should focus on optimizing its inventory turnover and accounts receivable collection processes to shorten its cash conversion cycle, increase liquidity, and enhance overall financial performance.