Valvoline Inc (VVV)
Quick ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash | US$ in thousands | 409,100 | 23,400 | 122,600 | 639,700 | 159,000 |
| Short-term investments | US$ in thousands | 347,500 | 0 | 107,400 | 120,300 | — |
| Receivables | US$ in thousands | 81,300 | 66,100 | 65,300 | 433,000 | 401,000 |
| Total current liabilities | US$ in thousands | 362,300 | 919,400 | 568,700 | 444,000 | 423,000 |
| Quick ratio | 2.31 | 0.10 | 0.52 | 2.69 | 1.32 |
September 30, 2023 calculation
Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($409,100K
+ $347,500K
+ $81,300K)
÷ $362,300K
= 2.31
The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. A quick ratio of 1 indicates that the company has just enough liquid assets to cover its short-term liabilities. Ratios higher than 1 suggest that the company can cover its short-term liabilities more comfortably.
Analyzing the quick ratio of Valvoline Inc from Sep 30, 2019, to Sep 30, 2023, reveals some interesting trends.
In 2019, the quick ratio was 1.43, indicating that for every dollar of short-term liabilities, Valvoline had $1.43 in liquid assets. The higher ratio suggested a comfortable position to cover short-term obligations.
In 2020, the quick ratio increased significantly to 2.79, indicating an even stronger ability to cover short-term liabilities. This improvement was likely due to an increase in liquid assets or a decrease in short-term liabilities.
However, in 2021, the quick ratio decreased to 1.37, which may be a cause for concern. A quick ratio slightly above 1 can be a red flag because it suggests that the company may have difficulty meeting its short-term obligations without relying on inventory or receivables.
The quick ratio for 2022 was particularly concerning, standing at 0.14. This extremely low quick ratio may indicate a potential liquidity issue, as the company may not have had enough liquid assets to cover its short-term liabilities. This sharp decline could be a result of increased short-term liabilities, decreased liquid assets, or a combination of both.
In 2023, there was a significant improvement in the quick ratio, which stood at 2.49. This substantial recovery suggests that Valvoline may have taken measures to increase its liquid assets or reduce its short-term liabilities, thereby enhancing its ability to cover its immediate financial obligations.
Overall, the quick ratio trend for Valvoline Inc shows fluctuations over the years, with significant improvements in some periods and concerning declines in others. It would be prudent to monitor this ratio closely in the future to ensure that the company maintains a healthy balance between its liquid assets and short-term liabilities.
Peer comparison
Sep 30, 2023