Avantor Inc (AVTR)

Avantor Inc's current ratio has shown a decreasing trend over the years, indicating a slight decline in its short-term liquidity position. The current ratio dropped from 1.80 in 2020 to 1.07 in 2024, potentially raising concerns about the company's ability to meet its short-term obligations using its current assets.

Similarly, the quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also exhibited a declining pattern from 1.13 in 2020 to 0.65 in 2024. This suggests that Avantor's ability to cover immediate liabilities with its most liquid assets has weakened over the years.

Lastly, the cash ratio, which specifically looks at the company's ability to cover current liabilities with cash and cash equivalents, experienced fluctuations but overall showed a decreasing trend from 0.23 in 2020 to 0.13 in 2024. This indicates a reduction in Avantor's capacity to settle its short-term obligations solely with cash resources.

In conclusion, the liquidity ratios of Avantor Inc paint a picture of decreasing liquidity strength over the years, which may warrant further analysis to understand the underlying factors driving these trends.

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Additional liquidity measure

The cash conversion cycle of Avantor Inc has shown some fluctuations over the years. In December 2020, the company's cash conversion cycle was 68.69 days. This increased slightly to 69.13 days by December 2021. Subsequently, there was a further increase to 70.74 days by December 2022 and a more significant rise to 76.29 days by December 2023. However, in December 2024, there was a notable improvement as the cash conversion cycle decreased to 61.23 days.

The cash conversion cycle is a measure of how long it takes for a company to convert its investments in inventory into cash flows from sales. A shorter cash conversion cycle indicates that the company is able to efficiently manage its working capital and generate cash from its operations more quickly.

The upward trend in Avantor Inc's cash conversion cycle from 2020 to 2023 suggests that the company may have faced challenges in managing its inventory, accounts receivable, and accounts payable efficiently during this period, leading to a longer cash conversion cycle. However, the improvement seen in 2024 indicates that the company may have implemented more effective strategies to streamline its operations and convert its investments into cash faster.

Overall, while fluctuations in the cash conversion cycle are normal for companies, Avantor Inc should continue to monitor and optimize its working capital management practices to ensure optimal efficiency in cash flow generation.