Cardinal Health Inc (CAH)

The liquidity ratios of Cardinal Health Inc have exhibited some fluctuations over the past five years.

1. Current Ratio:
The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown a decreasing trend from 1.10 in 2020 to 0.98 in 2024. Although the current ratio was above 1 in all years, indicating that the company had sufficient current assets to cover its current liabilities, the decreasing trend may raise concerns about the company's liquidity position.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Cardinal Health Inc's quick ratio has been relatively low, ranging from 0.45 to 0.50 over the five-year period. This suggests that the company may have difficulty meeting its short-term obligations without relying on inventory liquidation.

3. Cash Ratio:
The cash ratio, which focuses solely on the most liquid current assets, has also shown some variability, ranging from 0.12 to 0.15. While the cash ratio increased slightly in 2024 compared to the previous year, the overall levels indicate that Cardinal Health Inc may have limited cash on hand relative to its current liabilities.

Overall, the liquidity ratios of Cardinal Health Inc indicate a mixed performance in terms of the company's ability to meet its short-term obligations. Investors and stakeholders may want to monitor these ratios closely to assess the company's liquidity position and financial health.

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Additional liquidity measure

The cash conversion cycle of Cardinal Health Inc has shown a consistent improvement over the past five years. The company has managed to optimize its operating cycle efficiently, resulting in a negative cash conversion cycle each year. This signifies that Cardinal Health is able to convert its investments in raw materials into cash quickly through efficient management of its inventory, receivables, and payables.

The trend indicates that Cardinal Health has been able to reduce the time it takes to convert its resources into cash, ultimately improving its cash flow position. The negative cash conversion cycle suggests that the company is able to generate cash from its operations before needing to pay its suppliers, which is a positive indicator of liquidity and operational efficiency.

Overall, the consistently negative cash conversion cycle of Cardinal Health Inc reflects effective working capital management and operational performance, indicating a strong financial position and efficient use of resources.