Cintas Corp. (NASDAQ:CTAS)

Current Ratio

The current ratio displayed fluctuation throughout the observed periods. It initially increased from 1.98 in 2019 to a peak of 2.61 in 2020, indicating improved short-term liquidity. However, it then declined significantly to 1.47 in 2021, followed by a recovery to 1.84 in 2022 and a further increase to 2.39 in 2023. The most recent data point in 2024 shows a decrease to 1.74. Overall, the current ratio demonstrates variability but remains above 1, suggesting the company generally maintains adequate current assets relative to current liabilities.

Quick Ratio

The quick ratio exhibited a similar pattern to the current ratio, but with some notable differences in magnitude. It rose from 0.89 in 2019 to 1.15 in 2020, showing a temporary strengthening in liquidity excluding inventory. Subsequently, the ratio declined to 0.72 in 2021 and slightly improved to 0.77 in 2022. By 2023, it climbed to 1.04 before falling again to 0.87 in 2024. These fluctuations reflect a less stable but overall lower level of liquid assets compared to current liabilities, pointing to moderate liquidity challenges in some years.

Cash Ratio

The cash ratio demonstrated notable variability and generally low absolute values over the period. Starting from a very low 0.09 in 2019, it nearly doubled to 0.16 in 2020 and further increased to 0.26 in 2021, indicating a temporary accumulation of cash or cash equivalents. The ratio sharply declined to 0.06 in 2022, reached 0.10 in 2023, and then increased again to 0.19 in 2024. Despite these changes, the cash ratio remains relatively low, suggesting limited cash reserves relative to current liabilities, which may imply reliance on other current assets or external financing for liquidity.

The analysis of the annual financial data reveals several notable trends regarding liquidity and short-term financial health.

Current Assets

Current assets have shown an overall upward trajectory over the six-year period. Starting at approximately 2.24 billion USD in 2019, current assets increased consistently, peaking near 3.19 billion USD by 2024. Despite a slight dip between 2021 and 2022, the general trend indicates growth in short-term asset holdings.

Current Liabilities

Current liabilities exhibit greater fluctuations across the same period. There was a notable decrease in liabilities from about 1.13 billion USD in 2019 to below 0.89 billion USD in 2020, followed by a sharp increase in 2021, peaking at approximately 1.93 billion USD. In subsequent years, liabilities varied, decreasing in 2022 and 2023 before rising again close to 1.83 billion USD in 2024. This variability suggests some volatility in short-term debt or obligations.

Current Ratio

The current ratio reflects the interplay between assets and liabilities, demonstrating fluctuating liquidity levels. Starting at a moderate ratio of 1.98 in 2019, liquidity strengthened to 2.61 in 2020, indicating a solid ability to cover current liabilities. However, it dropped significantly to 1.47 in 2021, aligning with the spike in liabilities that year. The ratio recovered to 1.84 in 2022 and further improved to 2.39 in 2023, suggesting strengthened short-term financial stability. Yet, by 2024, the ratio declined again to 1.74, indicating a reduction in liquidity compared to the prior year but remaining above 1, which generally signifies adequate coverage.

In summary, the data reveals growth in current assets, volatile current liabilities, and a corresponding variation in liquidity as reflected by the current ratio. The fluctuations in current liabilities, especially the spike in 2021, appear to drive much of the movement in liquidity ratios, emphasizing the company's varying short-term obligations over time. Although liquidity remains generally adequate, the declining current ratio in 2024 compared to 2023 may warrant attention to ensure ongoing financial stability.

The analysis of the financial data over the six-year period reveals several notable trends and fluctuations in key liquidity metrics.

Total quick assets

The total quick assets experienced an initial slight increase from 1,006,765 thousand US dollars in May 2019 to 1,015,771 thousand US dollars in May 2020. Subsequently, there was a significant jump to 1,395,350 thousand US dollars in May 2021. However, this was followed by a decline to 1,096,691 thousand US dollars in May 2022. The asset level rebounded in the next two years, rising to 1,277,142 thousand US dollars in May 2023 and further to 1,586,197 thousand US dollars in May 2024. The pattern indicates some volatility but a generally upward trend in quick assets toward the end of the period.

Current liabilities

Current liabilities showed a sharp decrease from 1,127,733 thousand US dollars in May 2019 to 885,195 thousand US dollars in May 2020. Following this, liabilities surged dramatically to 1,934,085 thousand US dollars in May 2021. Thereafter, liabilities decreased to 1,432,890 thousand US dollars in May 2022 and further declined to 1,230,062 thousand US dollars in May 2023, before increasing again to 1,828,519 thousand US dollars in May 2024. This demonstrates a high degree of fluctuation, with a notable peak in 2021 followed by moderate moderation and then an uptick in the latest year.

Quick ratio

The quick ratio, representing the firm's short-term liquidity position, started below 1.0 at 0.89 in May 2019, indicating potential liquidity constraints. It improved to 1.15 in May 2020, reflecting a stronger liquidity buffer relative to current liabilities. However, this was reversed in May 2021 when the ratio dropped significantly to 0.72, signaling possible liquidity pressure. The ratio improved slightly but remained below 1.0 in May 2022 at 0.77, rose again to 1.04 in May 2023 suggesting improved short-term solvency, but declined to 0.87 by May 2024. Overall, the firm’s quick ratio exhibits considerable volatility and fluctuates around the critical benchmark of 1.0, indicating recurring short-term liquidity challenges.

In summary, the financial data reveals an erratic pattern in both quick assets and current liabilities, which in turn has contributed to an unstable quick ratio over the observed period. The variations suggest that the firm has faced intermittently tight liquidity conditions, particularly evident during the years 2021 and 2024. While the recovery in quick assets in the latest period is positive, the increase in current liabilities during the same timeframe warrants caution regarding short-term financial stability.

Total Cash Assets

The total cash assets experienced a significant increase from May 31, 2019, to May 31, 2021, rising from 96,645 thousand US dollars to 493,640 thousand US dollars. However, this peak was followed by a sharp decline in May 31, 2022, dropping to 90,471 thousand US dollars. After this decrease, total cash assets showed a recovery trend, increasing to 124,149 thousand US dollars in May 31, 2023, and further rising substantially to 342,015 thousand US dollars in May 31, 2024.

Current Liabilities

Current liabilities displayed significant volatility over the analyzed period. Beginning at 1,127,733 thousand US dollars in May 31, 2019, they decreased to 885,195 thousand US dollars in May 31, 2020. Subsequently, current liabilities rose sharply to 1,934,085 thousand US dollars in May 31, 2021, followed by a reduction to 1,432,890 thousand US dollars in May 31, 2022. The downward trend continued to 1,230,062 thousand US dollars in May 31, 2023, but then the level surged again to 1,828,519 thousand US dollars in May 31, 2024.

Cash Ratio

The cash ratio, reflecting liquidity, showed fluctuating behavior in the period analyzed. It started at a low of 0.09 in May 31, 2019, nearly doubling to 0.16 by May 31, 2020. The ratio further improved to 0.26 in May 31, 2021, indicating a stronger liquidity position. However, a marked decline followed in May 31, 2022, with the cash ratio dropping to 0.06. Thereafter, liquidity gradually improved to 0.10 in May 31, 2023, and then more substantially to 0.19 by May 31, 2024.

Summary of Trends

Overall, the data reveals considerable fluctuations in cash assets and current liabilities, with notable volatility around the years 2021 and 2022. Total cash assets peaked dramatically in 2021 but fell sharply the following year before recovering. Current liabilities showed a similar pattern of significant rise and fall in the same timeframe, suggesting possible changes in working capital management or operational financing. The cash ratio trend corresponds to these movements, improving until 2021, weakening in 2022, and improving again by 2024. This indicates periods of both strengthened and weakened short-term liquidity, reflecting the dynamic financial conditions faced over the years analyzed.