CVS Health Corp (CVS)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.81 | 0.86 | 0.95 | 0.88 | 0.91 |
| Quick ratio | 0.66 | 0.64 | 0.67 | 0.59 | 0.56 |
| Cash ratio | 0.13 | 0.14 | 0.23 | 0.18 | 0.18 |
CVS Health Corp's liquidity ratios indicate the company's ability to meet its short-term financial obligations.
1. Current Ratio:
- The current ratio decreased from 0.91 in 2020 to 0.81 in 2024.
- This downward trend suggests that CVS Health Corp may be facing challenges in covering its current liabilities with its current assets.
- The current ratio remained below 1 throughout the period, which may raise concerns about the company's liquidity position.
2. Quick Ratio:
- The quick ratio fluctuated slightly during the period, ranging from 0.56 in 2020 to 0.66 in 2024.
- This ratio takes into account only the most liquid assets, providing a more conservative measure of liquidity.
- While the quick ratio improved over the years, it still indicates that CVS Health Corp may have difficulties in meeting its short-term obligations without relying on inventory.
3. Cash Ratio:
- The cash ratio ranged from 0.13 in 2024 to 0.23 in 2022.
- This ratio reflects the company's ability to cover its short-term liabilities with cash and cash equivalents only.
- The decreasing trend in the cash ratio suggests that CVS Health Corp may have reduced cash reserves relative to its current liabilities.
In conclusion, CVS Health Corp's liquidity ratios paint a mixed picture of its short-term liquidity position. The decreasing current ratio and fluctuating quick ratio indicate potential liquidity challenges, while the cash ratio highlights a decline in cash reserves. Investors and stakeholders may need to monitor these ratios closely to assess the company's ability to meet its financial obligations in the short term.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 45.34 | 42.81 | 39.28 | 40.94 | 42.15 |
The cash conversion cycle of CVS Health Corp has exhibited fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 42.15 days, reflecting the number of days it takes for CVS Health Corp to convert its investments in inventory into cash flows from sales.
By December 31, 2021, the cash conversion cycle improved slightly to 40.94 days, indicating a more efficient conversion process. This trend continued into December 31, 2022, with a further decrease to 39.28 days, suggesting enhanced working capital management and quicker cash collection.
However, the cash conversion cycle increased to 42.81 days by December 31, 2023, indicating a potential delay in cash inflows relative to outflows. This could be due to various factors such as changes in inventory levels, sales terms, or payment processing.
As of December 31, 2024, the cash conversion cycle rose to 45.34 days, signifying a longer time period for CVS Health Corp to convert its resources into cash. This elongation may require the company to evaluate its operational efficiency and liquidity management to streamline its cash conversion process and optimize working capital utilization.