Amentum Holdings Inc. (AMTM)

Amentum Holdings Inc.'s liquidity ratios provide insights into its ability to meet short-term financial obligations.

The current ratio, which measures short-term solvency by comparing current assets to current liabilities, shows an improving trend over the years. In 2022, the current ratio stood at 1.91, indicating that the company had $1.91 in current assets for every dollar of current liabilities. However, by 2023 and 2024, this ratio decreased to 1.40 and 1.57, respectively. This suggests that the company may have experienced some challenges in managing its short-term obligations in those years.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity as it excludes inventory from current assets. In 2022, Amentum Holdings Inc. had a low quick ratio of 0.29, indicating that it had only $0.29 in quick assets (assets easily convertible to cash) for every dollar of current liabilities. Although there was a significant improvement in the quick ratio in September 2024 (1.45), it dropped again to 0.23 by December 2024. This fluctuation raises concerns about the company's ability to pay its current liabilities without relying on inventory sales.

The cash ratio, which measures the company's ability to cover current liabilities with its cash and cash equivalents, remained relatively stable between 2022 and 2024, ranging from 0.22 to 0.29. The cash ratio increased slightly to 0.23 in September 2024 and maintained the same level by December 2024. This indicates that Amentum Holdings Inc. may have a moderate ability to meet its short-term obligations using cash reserves alone.

In summary, Amentum Holdings Inc.'s liquidity ratios show a mixed performance over the years, with improvements in some areas and fluctuations in others. The company should closely monitor these ratios to ensure it maintains sufficient liquidity to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Amentum Holdings Inc. has shown a stable trend from December 31, 2021, to December 31, 2022, remaining at 0.00 days. There was a slight increase to 0.01 days by December 31, 2023. However, a significant change occurred by September 30, 2024, where the cash conversion cycle spiked to 70.91 days. This suggests a substantial delay in converting company resources into cash during that period. Fortunately, by December 31, 2024, the cash conversion cycle reverted back to 0.00 days, indicating a smoother cash flow operation. It would be important for the company to investigate and address the factors contributing to the prolonged cash conversion cycle seen in September 30, 2024, to maintain healthy liquidity and operational efficiency.