Avanos Medical Inc (AVNS)

Based on the provided data, Avanos Medical Inc's liquidity ratios have shown varying trends over the years.

1. Current Ratio: The current ratio indicates Avanos Medical Inc's ability to cover its short-term obligations with its current assets. The company's current ratio has generally been increasing from 2.81 in 2020 to 3.01 in 2021, but saw a slight decline to 2.69 in 2022. It further decreased to 2.08 in 2023 before rebounding to 2.37 in 2024. Avanos Medical Inc maintained a current ratio above 1 in all years, implying that it should be able to meet its short-term liabilities.

2. Quick Ratio: The quick ratio measures Avanos Medical Inc's ability to meet its short-term obligations with its most liquid assets, excluding inventory. The company's quick ratio has also shown fluctuations, starting at 0.67 in 2020, increasing to 0.85 in 2021, dropping to 0.69 in 2022, and declining further to 0.37 in 2023. It then improved to 0.65 in 2024. The downward trend in recent years indicates a potential challenge in meeting short-term obligations without relying on inventory liquidation.

3. Cash Ratio: The cash ratio focuses on Avanos Medical Inc's ability to cover its current liabilities with cash and cash equivalents. The company's cash ratio has followed a similar trend to the quick ratio, with fluctuations over the years. It started at 0.67 in 2020, increased to 0.85 in 2021, dropped to 0.69 in 2022, fell to 0.37 in 2023, and then recovered to 0.65 in 2024. The decline in 2023 suggests a lower ability to cover short-term liabilities solely with cash and equivalents.

In conclusion, while Avanos Medical Inc has generally maintained current ratios above 1, indicating a healthy liquidity position in the short run, the downward trends in quick and cash ratios over the years suggest a potential need to monitor the company's ability to meet short-term obligations without relying on inventory or cash reserves. Investors and stakeholders should pay attention to these ratios to assess the company's liquidity position accurately.

---

Additional liquidity measure

The cash conversion cycle of Avanos Medical Inc has shown variations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 180.52 days, indicating that it took approximately 180.52 days for Avanos to convert its investments in inventory and accounts receivable into cash.

By December 31, 2021, Avanos managed to improve its cash conversion cycle to 144.25 days, suggesting more efficient management of its working capital. However, in the following years, the cash conversion cycle lengthened, reaching 187.73 days by December 31, 2022, and further increasing to 202.89 days by December 31, 2023.

Despite the fluctuations, as of December 31, 2024, Avanos was able to reduce its cash conversion cycle to 165.29 days, indicating a more efficient process in managing its operating cycle and converting investments into cash.

Overall, the analysis of Avanos Medical Inc's cash conversion cycle demonstrates fluctuations in the efficiency of its working capital management over the reviewed period.