Ross Stores Inc. (NASDAQ:ROST)

Current Ratio

The current ratio demonstrates a generally positive trend from 1.61 in early 2017 to 1.77 in early 2022, indicating an improvement in the company's ability to cover its short-term liabilities with its short-term assets. Despite a decline to 1.27 in early 2020, which may reflect liquidity strain during that period, the ratio recovered sharply in the following years, suggesting enhanced liquidity management or asset allocation.

Quick Ratio

The quick ratio followed a similar trend, increasing from 0.68 in early 2017 to 1.2 in early 2022. Notably, it dropped to 0.54 in early 2020, a more pronounced reduction than seen in the current ratio, possibly indicating a temporary decrease in more liquid assets such as cash or receivables relative to current liabilities. The significant rise thereafter to above 1.0 points to strengthened liquidity without depending on inventory.

Cash Ratio

The cash ratio, reflecting the most liquid assets available, also shows improvement over the period, from 0.63 in early 2017 to 1.17 in early 2022. There was a notable dip to 0.5 in early 2020, parallel to the other liquidity ratios, which may correspond to extraordinary circumstances impacting cash reserves. The subsequent recovery and sustained level above 1.0 during 2021 and 2022 further reinforce the firm's enhanced liquidity position.

The analysis of the annual financial data over the six-year period reveals several key developments in the company's liquidity position.

Current Assets

Current assets showed a steady upward trend from January 2017 to February 2020, increasing from approximately $2.81 billion to $3.43 billion. A significant jump occurred in January 2021, with current assets nearly doubling to around $6.69 billion, followed by a further increase to approximately $7.47 billion in January 2022. This sharp rise in current assets from 2020 to 2021 reflects a substantial accumulation of liquid or short-term assets.

Current Liabilities

Current liabilities also trended upward throughout the period. Starting at approximately $1.75 billion in January 2017, liabilities increased steadily, with notable acceleration beginning in February 2020, reaching about $2.70 billion. Liabilities continued to rise sharply to nearly $3.97 billion in January 2021 and further to about $4.21 billion in January 2022. The increase in liabilities is significant but proportionally less steep than the increase in current assets during the same timeframe.

Current Ratio

The current ratio, a key liquidity metric, remained relatively stable between 2017 and 2019, fluctuating mildly from 1.61 to 1.69. However, in February 2020, it dropped to 1.27, indicating a temporary decrease in liquidity relative to short-term obligations. This was followed by a rebound to 1.69 in January 2021 and a further improvement to 1.77 in January 2022. The recovery and subsequent improvement in the current ratio suggest enhanced short-term financial health and a stronger capacity to cover current liabilities by early 2021 and beyond.

Overall, the data indicates that while both current assets and current liabilities increased significantly over the period, current assets grew at a faster rate, especially after 2020. This led to improved liquidity as reflected in the current ratio recovery and growth. The temporary dip in liquidity during early 2020 may be attributed to specific operational or market conditions, but the subsequent recovery points to effective management of working capital and solvency positions in the more recent years.

The financial data demonstrates fluctuations and notable shifts in liquidity over the examined periods.

Total quick assets

The total quick assets exhibit a general upward trend from 1,186,753 thousand US dollars in early 2017 to approximately 5,041,612 thousand US dollars by early 2022. A steady increase is visible from 2017 through 2019, with values rising from about 1.19 million to 1.51 million. A slight decline occurred in 2020, with a drop to approximately 1.45 million, followed by a substantial surge in 2021 reaching nearly 4.93 million, which was maintained into 2022.

Current liabilities

Current liabilities increased consistently throughout the period. Starting at roughly 1.75 million in 2017, liabilities rose steadily each year to reach 4.21 million in 2022. The most significant increases took place between 2019 and 2021, with the figure climbing from about 2 million to nearly 4 million, followed by a modest rise into 2022.

Quick ratio

The quick ratio, which measures short-term liquidity by comparing quick assets to current liabilities, showed variability. It started at 0.68 in 2017, marginally improved to 0.75 in 2019, then decreased sharply to 0.54 in 2020. A strong rebound was seen in 2021, with the ratio rising to 1.24, indicating that quick assets exceeded current liabilities for the first time in the observed period. In 2022, the ratio slightly declined to 1.20 but remained above 1, indicating sustained liquidity strength.

In summary, while current liabilities increased substantially over the five-year span, quick assets grew at a higher rate, resulting in improved liquidity positions by 2021. The quick ratio's rise above unity in 2021 and maintenance in 2022 reflects a stronger ability to meet short-term obligations using highly liquid assets. This improvement may indicate strategic enhancements in asset management or capital allocation during the latter years.

Total Cash Assets

The total cash assets displayed a generally upward trend from January 2017 through January 2022. Starting at approximately $1.11 billion in early 2017, the figure grew steadily each year, reaching about $1.41 billion by early 2019. A slight decline was observed in early 2020, with cash assets decreasing to around $1.35 billion. However, a significant increase occurred in early 2021, with cash assets more than tripling to approximately $4.82 billion, followed by a modest rise to about $4.92 billion in early 2022.

Current Liabilities

Current liabilities exhibited a consistent upward trajectory throughout the period analyzed. From $1.75 billion in early 2017, liabilities gradually increased year-over-year, reaching approximately $2.01 billion by early 2019. A more pronounced increase took place in early 2020, with liabilities climbing to roughly $2.70 billion. This upward momentum continued sharply into early 2021 and early 2022, with current liabilities reaching around $3.97 billion and $4.21 billion respectively.

Cash Ratio

The cash ratio reflected fluctuating but generally improving liquidity conditions over the period. Initially, it rose moderately from 0.63 in early 2017 to 0.70 in early 2019, indicating a strengthening ability to cover current liabilities with cash assets. However, the ratio declined to 0.50 in early 2020, suggesting a temporary weakening in liquidity. This was followed by a sharp increase to 1.21 in early 2021, indicating a robust cash position relative to current liabilities. The ratio remained strong in early 2022 at 1.17, slightly below the previous year but still substantially higher than earlier periods.

Summary

Overall, the data reveals a significant growth in total cash assets and current liabilities over the five-year period. Despite the increase in current liabilities, the cash ratio improvement from 2020 onward suggests enhanced liquidity and a more favorable capability to meet short-term obligations with cash reserves. Notably, the substantial surge in cash assets and liquidity ratios beginning in 2021 signals strengthened financial flexibility and potential strategic reserves accumulation. This improved liquidity position could indicate a deliberate financial strategy to bolster cash holdings relative to liabilities.