Yum! Brands Inc (YUM)

Yum Brands Inc.'s liquidity ratios provide insight into its ability to meet short-term obligations with its current assets. Looking at the trend over the past five years, the current ratio has shown fluctuations but has generally been above 1, indicating that the company has had more current assets than current liabilities each year. This suggests that Yum Brands Inc. has been able to cover its short-term obligations comfortably.

The quick ratio has also exhibited variability over the years but has generally been below the current ratio. This ratio excludes inventory from current assets and provides a more conservative measure of liquidity. Yum Brands Inc.'s quick ratio has been lower than the current ratio, suggesting that its inventory may not be as easily convertible to cash to meet immediate obligations.

Furthermore, the cash ratio, which measures the company's ability to cover current liabilities with its most liquid asset, cash, has also shown fluctuations. Yum Brands Inc.'s cash ratio has been generally low compared to the current and quick ratios, indicating that a significant portion of its current assets comprises non-cash items.

Overall, while the current and quick ratios indicate that Yum Brands Inc. has maintained a sufficient level of liquidity to cover short-term obligations, the lower cash ratio suggests a reliance on non-cash current assets to meet these obligations. This analysis highlights the importance of evaluating various liquidity ratios to gain a comprehensive understanding of a company's liquidity position.

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See also:

Yum! Brands Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Yum Brands Inc. has shown fluctuating trends over the past five years. In 2023, the company's cash conversion cycle improved to -8.48 days, indicating that it took approximately 8.48 days for Yum Brands to convert its investments in raw materials and other resources into cash from sales. This represents a significant enhancement compared to the cash conversion cycle of the previous year, which stood at -14.55 days.

The negative values of the cash conversion cycle signify that Yum Brands Inc. has been able to operate efficiently in terms of managing its working capital. A shorter cash conversion cycle implies that the company is able to collect cash from its sales quickly and efficiently, which can be beneficial for its liquidity and overall financial health.

It is notable that Yum Brands Inc. has been able to consistently reduce its cash conversion cycle over the past five years, demonstrating improvements in its inventory management, accounts receivable collection, and accounts payable payment processes. This trend suggests that the company has been effective in managing its cash flows and optimizing its working capital utilization, which can contribute to its profitability and financial performance. However, further analysis and comparison with industry benchmarks would provide a more comprehensive assessment of Yum Brands Inc.'s efficiency in converting its investments into cash.