The Wendy’s Co (WEN)

The liquidity ratios of Wendy`s Co, including the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.

The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Wendy`s Co's current ratio has ranged from 1.39 to 2.73 over the past five years, with the latest ratio at 2.19. This indicates that the company has improved its liquidity position compared to the prior year, as it now has $2.19 in current assets for every $1 of 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. Wendy`s Co's quick ratio has fluctuated between 0.94 and 2.29 over the same period, with the most recent ratio at 1.77. This indicates that the company can cover its short-term liabilities more comfortably when inventory is excluded from its liquid assets.

The cash ratio, the most conservative measure of liquidity, focuses solely on the company's ability to pay off its current liabilities with its cash and cash equivalents. Wendy`s Co's cash ratio has ranged from 0.66 to 1.99 in the last five years, with the latest ratio at 1.45. This suggests that the company holds sufficient cash to cover its immediate obligations.

Overall, Wendy`s Co's liquidity ratios show improvements in its ability to meet short-term obligations, with higher current, quick, and cash ratios compared to previous years. This indicates a stronger financial position in terms of liquidity for the company.

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Additional liquidity measure

The cash conversion cycle of Wendy's Co has fluctuated over the past five years. In 2023, the company's cash conversion cycle increased to 10.86 days from 2.88 days in 2022, indicating a longer period to convert inputs into cash. This increase could be due to various factors such as changes in inventory management, accounts payable, and accounts receivable collection.

Comparing to the previous years, the cash conversion cycle was significantly lower in 2022 and 2021 at 2.88 days and 1.98 days respectively. This suggests that Wendy's Co was more efficient in managing its working capital and converting it into cash during these years.

In 2020, the cash conversion cycle increased to 7.50 days from the significantly lower 1.98 days in 2021. This increase could indicate potential inefficiencies in working capital management or changes in the company's operational processes.

In 2019, Wendy's Co had a cash conversion cycle of 13.60 days, the highest among the five years analyzed. This indicates a longer period to convert inputs into cash, which could be a result of challenges in managing working capital efficiently.

Overall, fluctuations in Wendy's Co cash conversion cycle over the past five years suggest varying efficiency in managing working capital and converting it into cash. Monitoring and analyzing these trends can provide insights into the company's operational efficiency and financial performance.