CVS Health Corp (CVS)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 0.86 | 0.95 | 0.88 | 0.91 | 0.94 |
| Quick ratio | 0.64 | 0.67 | 0.59 | 0.56 | 0.56 |
| Cash ratio | 0.14 | 0.23 | 0.18 | 0.18 | 0.15 |
The liquidity ratios of CVS Health Corp have shown a declining trend over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, decreased from 0.94 in 2019 to 0.86 in 2023. A current ratio below 1 indicates that CVS Health Corp may have difficulty meeting its short-term liabilities with its current assets alone.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also decreased from 0.66 in 2019 to 0.63 in 2023. This indicates that CVS Health Corp's ability to meet its short-term obligations without relying on inventory has weakened over the years.
Furthermore, the cash ratio, which specifically focuses on the ability to cover current liabilities with cash and cash equivalents, decreased from 0.25 in 2019 to 0.18 in 2023. A cash ratio below 1 suggests that CVS Health Corp may not have sufficient liquid assets to cover its immediate financial obligations in a timely manner.
Overall, the declining trend in CVS Health Corp's liquidity ratios raises concerns about its short-term financial health and ability to meet its obligations, suggesting a potential need for improved liquidity management strategies in the future.
See also:
CVS Health Corp Liquidity Ratios
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 42.81 | 39.28 | 40.94 | 42.15 | 40.85 |
The cash conversion cycle of CVS Health Corp has shown a fluctuating trend over the past five years. In 2023, the cash conversion cycle increased to 41.20 days from 38.76 days in 2022, which indicates that the company took slightly longer to convert its investments in inventory and accounts receivable into cash. This could be attributed to factors such as changes in inventory management or payment terms with suppliers and customers.
Comparing the 2023 figure to earlier years, the cash conversion cycle in 2021 was 41.36 days, while it was higher in 2020 at 45.91 days and in 2019 at 44.04 days. The decreasing trend from 2020 to 2022 suggests an improvement in the efficiency of CVS Health Corp in managing its working capital and liquidity.
Overall, the cash conversion cycle provides insights into how efficiently CVS Health Corp is managing its operating cycle and converting its resources into cash. Monitoring this metric over time can help identify areas for improvement in working capital management and optimize cash flow operations.