Vestis Corporation (VSTS)

Based on the provided data, we can analyze the liquidity ratios of Vestis Corporation over the periods ending December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023.

1. Current Ratio:
- The current ratio measures a company's ability to meet its short-term obligations with its current assets. A higher current ratio is generally preferred as it indicates a stronger liquidity position.
- Vestis Corporation demonstrated a fluctuating current ratio over the periods, ranging from 2.45 to 2.83. The current ratio peaked at 2.83 in June 2023 and hit its lowest point at 2.45 in September 2023.
- Overall, the current ratio trend suggests that Vestis Corporation maintained a relatively strong ability to cover its short-term liabilities with its current assets during the periods analyzed.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. A higher quick ratio indicates a more immediate ability to cover short-term obligations without relying on selling inventory.
- Vestis Corporation's quick ratio remained low throughout the periods, ranging from 0.06 to 0.12. This indicates that the company may have difficulty meeting its short-term obligations with its most liquid assets alone.
- The consistently low quick ratio raises some concerns about Vestis Corporation's ability to cover immediate liabilities without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio as it only considers cash and cash equivalents to cover current liabilities. A higher cash ratio suggests a strong ability to meet short-term obligations with cash on hand.
- In line with the quick ratio, Vestis Corporation's cash ratio remained low at 0.06 across all periods. This indicates that the company may have limited cash reserves relative to its current liabilities.
- The low cash ratio highlights a lack of liquidity cushion from cash and cash equivalents to address immediate financial needs.

In conclusion, while Vestis Corporation maintained a relatively strong current ratio over the periods, the consistently low quick ratio and cash ratio raise concerns about the company's ability to cover immediate obligations without relying on inventory or having sufficient cash reserves. Investors and stakeholders should monitor these liquidity metrics closely to assess the company's short-term financial health and liquidity position.

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Additional liquidity measure

The cash conversion cycle of Vestis Corporation has exhibited a fluctuating trend over the four quarters of 2023. Starting the year at 111.68 days in March, the cycle decreased to 110.86 days in June before increasing to 106.29 days in September. Notably, by the end of December, the cycle saw a significant decrease to 99.79 days.

The downward trend in the cash conversion cycle indicates that Vestis Corporation has been able to manage its cash flow more efficiently towards the end of the year. This reduction may suggest improved inventory turnover, quicker accounts receivable collection, or extended accounts payable payment periods. However, it is important to further analyze the individual components of the cash conversion cycle to pinpoint the specific areas contributing to this improvement and assess the overall working capital management effectiveness of Vestis Corporation.