Valvoline Inc (VVV)

The liquidity ratios of Valvoline Inc have shown significant fluctuations over the last five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has decreased from 3.24 in 2020 to 0.72 in 2024. This downward trend indicates a potential weakening of the company's liquidity position.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown volatility. It dropped from 2.69 in 2020 to 0.44 in 2024, signaling a reduced ability to cover immediate liabilities with the most liquid assets.

Furthermore, the cash ratio, which provides the most conservative view of liquidity by considering only cash and cash equivalents, has fluctuated greatly over the years. It fell from 1.71 in 2020 to 0.19 in 2024, indicating a decline in the company's ability to pay off short-term debts solely with cash on hand.

Overall, the decreasing trend in all three liquidity ratios suggests that Valvoline Inc may be facing challenges in maintaining sufficient liquid assets to meet its short-term financial obligations. This situation could potentially raise concerns about the company's ability to navigate unexpected financial difficulties or capitalize on immediate investment opportunities.

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Additional liquidity measure

The cash conversion cycle is a financial metric that reflects the time it takes for a company to convert its investments in inventory into cash flows from sales. A negative cash conversion cycle indicates that the company is able to collect cash from customers before paying its suppliers, which is seen as a positive sign of efficient working capital management.

In the case of Valvoline Inc, the cash conversion cycle has fluctuated over the past five years. In 2024 and 2023, the company had a negative cash conversion cycle of -1.92 days and -6.08 days, respectively. This shows that Valvoline Inc was able to collect cash from customers before paying its suppliers during these years, indicating efficient working capital management.

On the other hand, in 2020, Valvoline Inc had a significantly higher cash conversion cycle of 68.49 days, indicating a longer period between investing in inventory and collecting cash from sales. This may suggest less effective management of working capital during that year.

Overall, analyzing the trend of Valvoline Inc's cash conversion cycle, we observe fluctuations over the years. By focusing on maintaining a negative or low cash conversion cycle, the company can continue to improve its working capital efficiency and optimize cash flows.