AbbVie Inc (ABBV)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 0.87 | 0.96 | 0.79 | 0.84 | 3.18 |
| Quick ratio | 0.63 | 0.69 | 0.56 | 0.60 | 2.91 |
| Cash ratio | 0.34 | 0.31 | 0.28 | 0.30 | 2.56 |
The liquidity ratios of Abbvie Inc indicate the company's ability to meet its short-term financial obligations.
The current ratio has been decreasing over the past five years, from 3.18 in 2019 to 0.87 in 2023. This indicates that the company may be facing challenges in covering its current liabilities with its current assets. A current ratio below 1 suggests potential liquidity issues.
Similarly, the quick ratio, also known as the acid-test ratio, has been declining from 3.06 in 2019 to 0.76 in 2023. This ratio excludes inventory from current assets, focusing on the most liquid assets like cash and accounts receivable. The decreasing trend indicates a potential decrease in the company's ability to cover immediate liabilities without relying on inventory.
The cash ratio, which measures the firm's ability to cover its short-term liabilities with cash and cash equivalents, has also shown a decrease from 2.71 in 2019 to 0.47 in 2023. This indicates a declining ability to meet short-term obligations solely with cash on hand.
Overall, the decreasing trend in all three liquidity ratios suggests that Abbvie Inc may be experiencing challenges in maintaining sufficient liquid assets to cover its short-term liabilities. The company may need to closely monitor its liquidity position and take necessary steps to improve its liquidity ratios in the future.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 78.26 | 76.48 | 67.20 | 81.92 | 77.27 |
The cash conversion cycle for Abbvie Inc has fluctuated over the past five years. In 2023, it stands at 82.31 days, showing a slight improvement from the previous year's figure of 84.28 days. This indicates that the company takes approximately 82.31 days to convert its investments in inventory and other resources into cash flows from sales.
Comparing the current cycle to earlier years, we observe that Abbvie Inc's cash conversion cycle was lower in 2021 at 69.95 days compared to 2020 and 2019. However, it increased in 2022 before showing some stabilization in 2023.
The cash conversion cycle is a critical metric for measuring the efficiency of a company's working capital management. A shorter cash conversion cycle generally indicates that the company is able to quickly convert its investments into cash, which can be reinvested or used for other purposes. Conversely, a longer cycle may suggest inefficiencies in managing inventory, accounts receivable, and accounts payable.
Overall, Abbvie Inc's cash conversion cycle has shown some fluctuations in recent years, and further analysis of the underlying factors affecting the cycle may provide insights into the company's operational and financial efficiency.