WD-40 Company (WDFC)

The liquidity ratios of WD-40 Company show a fluctuating trend over the past five years.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, has decreased from 3.08 in 2020 to 2.47 in 2024. This indicates a slight decline in the company's short-term liquidity position. However, the current ratio remains above 1, which generally suggests that WD-40 Company is capable of covering its current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. WD-40 Company's quick ratio has also experienced some fluctuation, with a notable decrease from 2.28 in 2020 to 1.59 in 2024. While the quick ratio has decreased, indicating a potential decrease in the company's ability to quickly meet its short-term obligations without relying on inventory, the ratio still remains above 1, implying that WD-40 Company can cover its short-term liabilities with its most liquid assets.

The cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, has shown a downward trend over the past five years, decreasing from 0.94 in 2020 to 0.45 in 2024. This indicates that WD-40 Company has a lower proportion of cash on hand compared to its current liabilities. A cash ratio below 1 suggests that the company may have difficulty meeting its short-term obligations solely with cash resources.

In summary, while WD-40 Company's liquidity ratios have fluctuated in recent years, the company generally maintains a reasonable level of liquidity to meet its short-term obligations. However, the downward trend in the quick and cash ratios may warrant further monitoring to ensure the company's continued ability to meet its short-term financial commitments.

---

Additional liquidity measure

The cash conversion cycle of WD-40 Company has fluctuated over the past five years. In 2024, the cash conversion cycle decreased to 106.95 days from 115.78 days in 2023, indicating an improvement in the company's efficiency in managing its cash flows. This reduction suggests that the company is taking less time to convert its investments in inventory and other resources into cash.

Comparing 2024 to earlier years, the cash conversion cycle decreased significantly from 127.78 days in 2022 and 110.63 days in 2020, but it increased slightly from 103.17 days in 2021. This trend suggests that WD-40 Company has made progress in streamlining its operating cycle and managing its working capital efficiently in recent years.

Overall, a lower cash conversion cycle is generally favorable as it indicates that the company is efficiently managing its working capital and generating cash from its operations. WD-40 Company's improving cash conversion cycle over the years reflects positively on its ability to convert its investments into cash effectively.