Vestis Corporation (VSTS)

The liquidity ratios of Vestis Corporation provide insight into the company's ability to meet its short-term obligations and manage its cash flow effectively. Looking at the trend over the past five years:

1. Current ratio: Vestis Corporation's current ratio has shown a declining trend, decreasing from 2.58 in 2023 to 1.73 in 2024. While a current ratio above 1 is typically considered favorable, indicating the company's ability to cover its short-term liabilities with its current assets, the decreasing trend may suggest potential challenges in managing current liabilities in the most recent year.

2. Quick ratio: The quick ratio, also known as the acid-test ratio, measures the company's ability to meet its short-term obligations with its most liquid assets. Vestis Corporation's quick ratio has fluctuated significantly over the years, from a low of 0.06 in 2022 to a high of 0.46 in 2024. A quick ratio below 1 indicates potential issues in meeting immediate obligations without relying on inventory sales.

3. Cash ratio: The cash ratio provides a more stringent measure of liquidity, focusing solely on the company's cash and cash equivalents. Vestis Corporation's cash ratio has also varied over the years, reaching a low of 0.06 in 2022 and a high of 0.09 in 2023. The declining cash ratio in 2024 to 0.07 may indicate a decrease in the company's cash holdings relative to its current liabilities.

Overall, the liquidity ratios of Vestis Corporation show some fluctuations and a declining trend in certain key ratios. It is essential for the company to closely monitor its liquidity position to ensure it can cover short-term obligations and maintain financial stability. Further analysis and comparison with industry benchmarks may provide additional insights into the company's liquidity management.

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Additional liquidity measure

The cash conversion cycle of Vestis Corporation has shown significant improvement over the past five years. In 2020, the company had a cash conversion cycle of 0 days, indicating that it was able to convert its inventory into cash very quickly. However, in the following years, the cash conversion cycle increased, reaching a peak of 115.17 days in 2021. This suggests that the company was taking longer to sell its inventory and collect cash from customers.

The trend reversed in the subsequent years, with the cash conversion cycle decreasing to 110.20 days in 2022, 106.29 days in 2023, and further improvement to 23.37 days in 2024. This improvement indicates that Vestis Corporation has been managing its inventory more efficiently and collecting cash from customers at a faster rate.

Overall, the decreasing trend in the cash conversion cycle signifies that the company has been more effective in managing its working capital and converting inventory into cash. A lower cash conversion cycle can indicate improved liquidity and operational efficiency for Vestis Corporation.