Adapthealth Corp (AHCO)

Adapthealth Corp's liquidity ratios have shown some fluctuations over the past five years.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- Adapthealth Corp's current ratio increased from 0.86 in 2020 to 1.34 in 2021, indicating an improvement in the company's short-term liquidity position.
- However, the current ratio slightly decreased to 1.28 in 2022, 1.21 in 2023, and then increased again to 1.33 in 2024.
- Overall, the company has generally maintained a current ratio above 1, which suggests that it has been able to meet its short-term obligations with its current assets.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- Adapthealth Corp's quick ratio improved from 0.69 in 2020 to 1.07 in 2021, showing better liquidity without relying on inventory.
- Despite some fluctuations, the quick ratio remained relatively stable around 1.00 in 2022, 2023, and 2024, indicating that the company has maintained its ability to cover its short-term liabilities with its most liquid assets.

3. Cash Ratio:
- The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents.
- Adapthealth Corp's cash ratio fluctuated over the years, from 0.24 in 2020 to 0.30 in 2021, then declined to 0.11 in 2022 before gradually increasing to 0.19 in 2024.
- The cash ratio indicates the company's capacity to repay its short-term obligations solely with cash and cash equivalents, with a higher ratio generally considered more favorable.

In conclusion, Adapthealth Corp's liquidity ratios have shown some variability over the years, but overall, the company has maintained a satisfactory liquidity position, as evidenced by its current, quick, and cash ratios staying above the critical levels of 1, 1, and 0.2, respectively.

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Additional liquidity measure

The cash conversion cycle of Adapthealth Corp has exhibited fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was 14.46 days, indicating a relatively efficient conversion of inventory to cash. However, there was a significant increase in the cash conversion cycle to 36.87 days as of December 31, 2021, and a further rise to 37.17 days by December 31, 2022. This suggests potential challenges in managing the company's working capital and cash flow.

By December 31, 2023, the cash conversion cycle increased to 40.48 days, indicating a longer time taken to convert inventory into cash, which may signal inefficiencies in the company's operations or collection processes. However, there was a slight improvement by December 31, 2024, with the cash conversion cycle decreasing to 29.87 days, although it remained higher than the initial value in 2020.

Overall, the trend in Adapthealth Corp's cash conversion cycle shows inconsistency and potential areas for improvement in managing working capital effectively to enhance cash flow efficiency. It is important for the company to closely monitor and address factors impacting the cash conversion cycle to optimize its liquidity position and operational performance.