Wingstop Inc (WING)

Based on the provided data for Wingstop Inc's liquidity ratios, the current ratio has shown an increasing trend from 1.44 in December 31, 2020, to 4.52 in December 31, 2024. The current ratio indicates the company's ability to cover its short-term liabilities with its current assets. A higher current ratio suggests that Wingstop Inc has a stronger ability to meet its short-term obligations.

The quick ratio, also known as the acid-test ratio, has a similar increasing trend over the years, from 0.91 in December 31, 2020, to 3.84 in December 31, 2024. The quick ratio provides a more stringent measure of liquidity as it only considers the most liquid assets to cover short-term liabilities. Wingstop Inc's increasing quick ratio indicates an improving ability to meet its short-term obligations using its most liquid assets.

Furthermore, the cash ratio has also shown a rising trend, increasing from 0.81 in December 31, 2020, to 3.61 in December 31, 2024. The cash ratio specifically measures the company's ability to cover its current liabilities with cash and cash equivalents, providing insight into its immediate liquidity position. Wingstop Inc's increasing cash ratio suggests a strengthening ability to meet short-term obligations using cash reserves.

Overall, the improving trends in both the current ratio, quick ratio, and cash ratio indicate Wingstop Inc's enhanced liquidity position over the years, reflecting the company's ability to cover its short-term obligations more comfortably and efficiently.

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Additional liquidity measure

The cash conversion cycle of Wingstop Inc demonstrates notable fluctuations over the years. As of December 31, 2020, the company had a negative cash conversion cycle of -2.70 days, indicating that it was able to convert its investments in inventory and accounts receivable into cash quickly.

By December 31, 2021, the cash conversion cycle further improved to -4.20 days, suggesting enhanced efficiency in converting assets into cash. However, by December 31, 2022, the cycle saw a slight increase to -3.63 days, signifying a slightly longer time to convert assets into cash compared to the previous year.

As of December 31, 2023, Wingstop Inc achieved a positive cash conversion cycle of 0.86 days, indicating a temporary delay in converting assets into cash. This trend was reversed by December 31, 2024, with the cycle improving to -0.50 days, showcasing a return to efficiency in managing working capital.

Overall, Wingstop Inc's cash conversion cycle reflects variable performance in efficiently managing its working capital and liquidity over the years, with a mix of positive and negative cycles influencing its cash conversion efficiency.