Cardinal Health Inc (CAH)

The liquidity ratios of Cardinal Health Inc. over the specified periods reveal a trend of gradual decline.

The current ratio, which measures the company's ability to meet short-term obligations with its current assets, started at approximately 1.13 as of September 30, 2020. It experienced a slight upward trend reaching around 1.20 by March 31, 2021, indicating a marginal improvement in liquidity during that period. However, following this peak, the ratio demonstrated a consistent downward trajectory, decreasing to below 1.00 by June 30, 2023, and continuing to decline to approximately 0.94 by June 30, 2025. A current ratio below 1 suggests that the company's current assets are insufficient to cover its current liabilities, potentially signaling liquidity concerns.

The quick ratio, which excludes inventory from current assets to focus on the most liquid assets, remained relatively stable over the same period but also exhibited a declining trend. It hovered around 0.47-0.48 in 2020 and 2021, with minor fluctuations, but gradually decreased to approximately 0.42-0.44 by mid-2025. This sustained but slight decline indicates consistent challenges in rapidly converting assets into cash to meet immediate liabilities.

Similarly, the cash ratio, which assesses the company's ability to cover short-term liabilities solely with cash and cash equivalents, showed variability but generally trended downward. It started at 0.11 in September 2020, increased temporarily to about 0.15 in December 2020 and June 2022, but subsequently declined to lows near 0.08-0.09 in late 2023 and mid-2025. The consistently low values across all periods imply that cash holdings alone may not suffice to cover immediate obligations, highlighting a cautious liquidity stance.

Overall, these ratios collectively suggest a gradual decrease in Cardinal Health Inc.'s liquidity position over the analyzed timeframe. The ratios indicate tightening liquidity margins, with the current ratio approaching or falling below 1.0, the quick ratio maintaining modest levels, and the cash ratio remaining low. The trend signifies a potential shift towards a less liquid position, emphasizing the importance of effective cash flow management and liquidity planning in the near to medium term.

---

Additional liquidity measure

The analysis of Cardinal Health Inc’s cash conversion cycle (CCC) over the referenced period reveals a consistently negative trend, indicating a continual advance of cash to suppliers relative to its receivables and inventory management.

Initially, the CCC hovered near zero in late 2020, with values such as 0.01 days on September 30, 2020, and a slight negative foot to -1.11 days by December 31, 2020. Throughout 2021, the cycle fluctuated narrowly around the zero mark, oscillating between marginally positive and negative values, with some days reaching 0.55 on September 30, 2021, and -1.71 days on December 31, 2021.

From 2022 onward, a clear trend of increasing negativity emerges, reflecting an improvement in aligning cash inflows and outflows. The CCC drops significantly to -2.74 days on June 30, 2022, and further distorts into a strongly negative territory with -3.67 days on September 30, 2022, and maintains this pattern, with -3.50 days on December 31, 2022, and -4.48 days on March 31, 2023. The cycle deepens further in subsequent quarters, reaching as low as -8.73 days on June 30, 2025.

This persistent negative CCC suggests that Cardinal Health effectively manages its supply chain by receiving cash from customers sooner relative to its payment obligations to suppliers. The increasing negativity over time indicates enhanced efficiency in managing accounts receivable, inventory, and accounts payable, leading to a situation where the company requires less net cash conversion time, or in some cases, effectively advances cash to suppliers.

In summary, the analysis indicates a strategic focus on optimizing cash flow by maintaining a negative and increasingly negative cash conversion cycle, thus reducing reliance on external financing and enhancing liquidity management over the analyzed period.