Cardinal Health Inc (CAH)

The liquidity ratios of Cardinal Health Inc. over the period from June 30, 2021, to June 30, 2025, demonstrate a consistent trend of gradual decline.

The current ratio, which measures the company's ability to meet its short-term obligations with its total current assets, decreased from 1.12 in 2021 to 0.94 in 2025. This decline indicates a diminishing buffer of current assets relative to current liabilities, approaching a level close to 1. This trend suggests the company's short-term liquidity position has been weakening over the observed period.

The quick ratio, which assesses liquidity excluding inventory (considered less liquid), exhibited minor fluctuations. It increased slightly from 0.45 in 2021 to 0.50 in 2022, then reverted to 0.45 in 2023, and remained relatively stable around 0.49 in 2024 before declining slightly to 0.44 in 2025. These figures indicate that, excluding inventory, the company's capability to cover short-term obligations with most liquid assets has remained somewhat stable but has shown a slight downward trend in recent years.

The cash ratio, reflecting the company's immediate liquidity through cash and cash equivalents, moved between 0.12 and 0.15 during the period, with a notable dip back to 0.10 in 2025. This suggests the company's ability to meet short-term liabilities solely with cash is modest and has experienced minor fluctuations without significant improvement.

Overall, the series of liquidity ratios show that Cardinal Health Inc. has experienced a gradual reduction in liquidity levels over the examined period, moving closer to, or below, the commonly accepted threshold of 1 for the current and quick ratios. This trend warrants cautious observation, as declining liquidity levels may impact the company's capacity to fulfill short-term obligations without resorting to asset liquidation or external financing.

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Additional liquidity measure

The analysis of Cardinal Health Inc's cash conversion cycle (CCC) over the period from June 30, 2021, through June 30, 2025, reveals a consistent trend of increasing efficiency in managing its working capital cycles. Specifically, the CCC has been trending more negative, indicating that the company is increasingly generating cash from its operating cycle more swiftly than it is financing its inventory and receivables.

Starting with a CCC of -0.90 days in June 2021, the cycle lengthened to -2.74 days by June 30, 2022, demonstrating an improvement in cash flow timing. This positive trend continued into 2023 and 2024, with the CCC reaching -5.67 days and -8.51 days, respectively. The most recent data point for June 2025 shows an even more negative CCC of -8.73 days.

A negative cash conversion cycle signifies that the company is converting its investments in inventory and receivables into cash more rapidly than it needs to pay its suppliers. The increasing negativity of the CCC over time suggests that Cardinal Health Inc has been enhancing its operational efficiency through better management of receivables collection, inventory turnover, or both.

Overall, the trend indicates an improving liquidity position and a more effective working capital cycle, which can contribute positively to the company's cash flow and financial stability.