Centene Corp (CNC)

Centene Corp.'s liquidity ratios exhibit fluctuating trends over the past five years.

The current ratio, which measures the company's ability to cover short-term obligations with its current assets, has been relatively stable, with a slight decline observed in 2022 and 2020. The ratio stood at 1.11 in 2023, indicating that Centene Corp. has $1.11 in current assets for every dollar of current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. This ratio has shown a similar pattern to the current ratio, hovering around 0.60-0.64 over the years. In 2023, the quick ratio was 0.64, suggesting that Centene Corp. has $0.64 in liquid assets (excluding inventory) to cover each dollar of current liabilities.

The cash ratio, which is the most conservative liquidity measure, illustrates the company's ability to cover current liabilities with cash and cash equivalents alone. Centene Corp.'s cash ratio has demonstrated an increasing trend since 2020, reaching 0.22 in 2023, meaning that the company holds $0.22 in cash and cash equivalents for every dollar of current liabilities.

Overall, Centene Corp.'s liquidity ratios indicate that the company has generally maintained a sufficient level of liquidity to meet its short-term obligations. The increasing cash ratio suggests a strengthened liquidity position in recent years, potentially providing a buffer against unexpected cash flow disruptions. However, the declining quick ratio may signal an increase in inventory relative to other liquid assets, which could warrant further investigation into the company's short-term liquidity management strategies.

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Additional liquidity measure

Centene Corp.'s cash conversion cycle has exhibited variability over the past five years. The company's cash conversion cycle increased from 30.55 days in 2019 to 36.81 days in 2023. This increase suggests that Centene Corp. is taking longer to convert its investments in inventory into cash receipts from sales.

The trend indicates that Centene Corp. may be holding onto inventory for a longer period before selling it, which could potentially tie up cash resources and negatively impact liquidity. Additionally, a longer cash conversion cycle may indicate inefficiencies in the company's operations or challenges in managing inventory levels effectively.

It is important for Centene Corp. to closely monitor and analyze its cash conversion cycle to identify areas for improvement and implement strategies to optimize working capital management. By reducing the cash conversion cycle, the company may enhance cash flow, improve liquidity, and ultimately enhance its overall financial performance.