Amentum Holdings Inc. (AMTM)

Amentum Holdings Inc.'s liquidity ratios, which provide insight into the company's ability to meet its short-term obligations, exhibit varying trends over the period under consideration.

1. Current Ratio:
- The current ratio measures the company's ability to cover its current liabilities with its current assets. Amentum Holdings Inc.'s current ratio has shown a generally healthy trend, improving from 1.91 in December 2022 to 1.97 in December 2023 before declining to 1.57 in September 2024. While a ratio above 1 indicates the company can meet its short-term obligations, the decrease in the current ratio in September 2024 may warrant further investigation to understand the reasons behind this decline.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. Amentum Holdings Inc.'s quick ratio demonstrates a less favorable trend, decreasing significantly from 0.29 in December 2022 to 0.23 in December 2023 before experiencing a notable improvement to 1.45 in September 2024. The sharp increase in the quick ratio in September 2024 suggests the company may have enhanced its ability to cover its immediate liabilities without relying on inventory.

3. Cash Ratio:
- The cash ratio focuses solely on a company's ability to cover its current liabilities with its cash and cash equivalents. Amentum Holdings Inc.'s cash ratio mirrors the trend seen in the quick ratio, showing a decrease from 0.29 in December 2022 to 0.23 in December 2023 before rising to 0.23 in September 2024. This improvement in the cash ratio by September 2024 indicates a strengthening liquidity position in terms of the company's cash reserves.

In summary, while the current ratio has shown some fluctuation, remaining above the acceptable threshold of 1, the quick and cash ratios have displayed more volatile trends. The notable increase in both the quick and cash ratios in September 2024 suggests potential enhancements in Amentum Holdings Inc.'s liquidity position. However, further analysis and monitoring may be required to assess the sustainability of these improvements over time.

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Additional liquidity measure

The cash conversion cycle for Amentum Holdings Inc. has been stable at 0.00 days for both December 31, 2022, and December 31, 2023. This indicates that the company efficiently converts its investments in inventory and other resources into cash inflows from sales within the same operating cycle, resulting in no idle funds tied up in the process.

However, there has been a noticeable increase in the cash conversion cycle to 70.91 days as of September 30, 2024. This longer cash conversion cycle suggests that Amentum Holdings Inc. is taking more time to convert its investments into cash, potentially due to delays in collecting receivables or managing inventory. It is essential for the company to closely monitor this trend to ensure efficient working capital management and optimize cash flow operations in the future.