Cintas Corp. (NASDAQ:CTAS)

Current Ratio

The current ratio exhibits notable fluctuations over the analyzed periods. Initially, it was relatively strong at 2.04 in August 2019, increasing to a peak of 2.61 by May 2020. Following this peak, a marked decline occurred, reaching a low of 1.02 in February 2022. Subsequently, the ratio demonstrated recovery and improvement, rising to 2.56 by August 2023, before experiencing another moderate decline towards the end of the period, settling around 1.58 in November 2024. The overall pattern suggests periods of tight liquidity interspersed with times of enhanced short-term asset coverage relative to liabilities.

Quick Ratio

The quick ratio shows a somewhat similar trajectory to the current ratio but at consistently lower levels, reflecting the exclusion of inventories from liquid assets. It began at 0.91 in August 2019, peaking at 1.18 in August 2020. A significant drop occurred thereafter, reaching a trough of 0.42 in February 2022. Following this low point, the ratio experienced a gradual resurgence, climbing to 1.1 by August 2023. Towards the latest quarters, the quick ratio declined again, settling near 0.74 by November 2024. This trend indicates variable liquidity, with periods where readily available assets were less capable of covering short-term obligations.

Cash Ratio

The cash ratio remains considerably lower than both the current and quick ratios throughout the periods, indicating a relatively small portion of cash and cash equivalents relative to current liabilities. Starting at a very low 0.09 in August 2019, it rose steadily to 0.47 by November 2020, after which it fell sharply to a minimum of 0.03 in February 2022. Post this dip, modest recoveries occurred, with values oscillating between 0.05 and 0.19, ending at 0.06 in November 2024. These findings suggest that while the company maintains some liquid assets beyond cash, it consistently holds minimal outright cash reserves to cover immediate liabilities.

The quarterly financial data exhibits varying trends in the current assets, current liabilities, and the resulting current ratio over the analyzed periods.

Current Assets

Current assets showed a general upward trend from August 2019 to November 2020, increasing from approximately 2.29 billion USD to over 3.10 billion USD, indicating an accumulation of liquid and short-term assets. After a peak in November 2020, current assets slightly declined and fluctuated moderately but remained relatively stable around the 2.6 to 3.0 billion USD range through the subsequent periods. Notably, there was a slight recovery trend starting May 2023, with current assets rising again towards approximately 3.17 billion USD by November 2024.

Current Liabilities

Current liabilities displayed significant volatility over the reporting periods. Initially, liabilities decreased from around 1.12 billion USD in August 2019 to a low of approximately 885 million USD in May 2020, before sharply increasing to a peak near 2.26 billion USD in August 2021. Post this peak, current liabilities declined substantially and fluctuated between roughly 1.2 billion USD and 1.6 billion USD up to August 2023. However, a subsequent increase is observed again from February 2024 to November 2024, where liabilities rose to approximately 2.01 billion USD.

Current Ratio

The current ratio followed the movements of current assets and liabilities but highlights shifts in short-term liquidity and risk management. Initially above 2.0 in 2019, the ratio improved to a high of 2.61 by May 2020, reflecting strong liquidity during that quarter. Thereafter, it sharply declined to a low near 1.02 in May 2022, signaling reduced short-term financial cushion. The ratio recovered again in the latter part of the data to approximately 2.56 by May 2023, indicating an enhancement in the company's ability to cover current obligations with current assets. In the last few quarters, the ratio declined once more, stabilizing around 1.5 by November 2024.

Overall, the data indicates an initially strong liquidity position that weakened considerably in the later periods, particularly around 2021 and mid-2022, before recovering somewhat in 2023. The fluctuations in current liabilities appear to be a primary driver of changes in the current ratio, alongside moderate changes in current assets. These variations suggest potential shifts in operational or financial policy impacting working capital management during the observed time frame.

Trend in Total Quick Assets

The total quick assets exhibit fluctuations over the observed periods. Initially, there was a moderate increase from approximately 1,019,666 thousand US dollars at the end of August 2019 to a peak near 1,613,441 thousand in November 2020. This was followed by a decline and relative stabilization around 1,000,000 to 1,100,000 thousand dollars during mid to late 2021. From early 2022 onward, the quick assets generally trended upward, reaching above 1,590,000 thousand US dollars by May 2024, despite some intermittent decreases.

Trend in Current Liabilities

Current liabilities showed notable variability across the quarters. Starting at approximately 1,122,882 thousand US dollars in August 2019, liabilities increased overall, peaking multiple times, including a significant surge to above 2,600,000 thousand US dollars in February 2022. After this peak, liabilities decreased substantially to around 1,230,062 thousand by May 2023, before rising again towards the end of the timeline, reaching near 2,007,767 thousand US dollars in November 2024. The pattern depicts substantial volatility and periodic spikes in liabilities.

Trend in Quick Ratio

The quick ratio, reflecting liquidity, demonstrated considerable variation throughout the periods. Initially near 0.91, it improved modestly and reached above 1.1 in early 2020. However, from mid-2021, the ratio dropped significantly, hitting lows around 0.42 at the beginning of 2022. This indicates a period of reduced liquidity. Subsequently, there was a recovery trend, with the ratio climbing back above 1.0 by mid-2023. Nonetheless, towards the end of the observed timeline, the quick ratio showed a decline again, falling to around 0.7 by late 2024. Overall, liquidity management appears to have experienced phases of both strength and weakness.

Summary and Insights

The interplay between total quick assets and current liabilities influenced the quick ratio, which serves as a proxy for short-term financial health. The observed increases in current liabilities often corresponded with dips in the quick ratio, suggesting periods where short-term obligations outpaced liquid assets. Conversely, improvements in quick assets were key contributors to liquidity recovery phases. The volatility in liabilities indicates variability in short-term financial commitments, which could be linked to operational or market conditions affecting cash flows. Continuous monitoring of these metrics remains crucial to maintaining financial stability.

The analysis of the quarterly financial data reveals several important trends regarding liquidity and short-term financial obligations.

Total Cash Assets

Total cash assets exhibit significant fluctuations across the observed periods. Initially, there was a growth from approximately 102 million to over 703 million within the span from August 2019 to November 2020, denoting an accumulation of cash reserves. However, following this peak, cash assets generally decreased with some intermittent recoveries, reaching lows below 80 million during mid-2021 and 2022. More recently, cash assets have partially rebounded, showing an increase towards mid-2024, but have not returned to the earlier high levels observed in late 2020.

Current Liabilities

Current liabilities also show notable volatility but tend to increase over time. Starting near 1.1 billion in August 2019, these liabilities peaked periodically, such as in May 2021 and early 2022, reaching values over 2.6 billion. Despite some decreases following these peaks, current liabilities remained elevated, consistently above 1 billion, and reached close to 2 billion towards late 2024. This pattern suggests persistent or growing short-term financial obligations.

Cash Ratio

The cash ratio, which measures the adequacy of cash to cover current liabilities, follows a downward trend overall, with considerable variability. The ratio peaked near 0.47 in November 2020, corresponding with the peak in cash assets and prior to some rises in liabilities. Subsequently, the ratio declined sharply to lows around 0.03 to 0.06 during much of 2021 and 2022, indicating a decreased ability to cover current liabilities solely with cash. Slight improvements in the cash ratio are visible in the 2023 and 2024 periods, yet levels remain relatively low, generally below 0.2, reflecting constrained liquidity relative to short-term obligations.

In summary, while cash assets have experienced intermittent growth, the substantial increases and sustained high levels of current liabilities have outpaced these cash reserves. The resulting low cash ratio throughout much of the recent periods indicates limited immediate liquidity and potential pressure to meet short-term liabilities using cash alone. The organization appears to have managed liquidity with periodic cash accumulations, but overall, the data suggests increasing reliance on other forms of financing or asset conversion beyond cash to satisfy current obligations.