CVS Health Corp (CVS)
Liquidity ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 0.81 | 0.80 | 0.86 | 0.81 | 0.86 | 0.86 | 0.86 | 0.92 | 0.95 | 0.94 | 0.91 | 0.88 | 0.88 | 0.94 | 0.95 | 0.93 | 0.91 | 0.95 | 0.98 | 0.99 |
| Quick ratio | 0.66 | 0.62 | 0.65 | 0.59 | 0.64 | 0.63 | 0.62 | 0.64 | 0.67 | 0.68 | 0.65 | 0.58 | 0.59 | 0.63 | 0.62 | 0.58 | 0.56 | 0.63 | 0.67 | 0.65 |
| Cash ratio | 0.13 | 0.11 | 0.20 | 0.16 | 0.14 | 0.20 | 0.21 | 0.24 | 0.23 | 0.28 | 0.22 | 0.16 | 0.18 | 0.20 | 0.17 | 0.15 | 0.18 | 0.19 | 0.27 | 0.21 |
Based on the provided data, we can observe the following trends in CVS Health Corp's liquidity ratios:
1. Current Ratio: The current ratio measures the company's ability to meet its short-term obligations with its current assets. CVS Health Corp's current ratio has been fluctuating over the years but generally declining since March 31, 2020. The ratio was consistently above 1 until December 31, 2020, indicating a healthy liquidity position. However, the current ratio has been below 1 since then, suggesting potential difficulties in meeting short-term obligations from current assets alone.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. CVS Health Corp's quick ratio has followed a similar trend to the current ratio, showing a decline over the years. The ratio was also consistently above 1 until December 31, 2020, signaling a good ability to cover short-term liabilities without relying on inventory. However, it has fallen below 1 since then, indicating a diminishing ability to meet short-term obligations quickly.
3. Cash Ratio: The cash ratio measures a company's ability to cover its current liabilities with its cash and cash equivalents. CVS Health Corp's cash ratio has fluctuated throughout the years, with some periods showing a relatively low cash position compared to current liabilities. The company saw an improvement in its cash ratio from December 31, 2020, to September 30, 2022, indicating better liquidity. However, the ratio declined towards the end of the period, potentially signaling a decrease in the ability to cover short-term obligations with cash and cash equivalents alone.
Overall, the liquidity ratios for CVS Health Corp demonstrate a mixed performance, with a general trend of declining ratios over the years, particularly in the current and quick ratios. This suggests a potential need for the company to manage its short-term liquidity more efficiently to meet its financial obligations.
See also:
Additional liquidity measure
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 45.60 | 43.86 | 38.56 | 38.60 | 42.80 | 40.42 | 38.62 | 39.77 | 39.28 | 38.17 | 40.00 | 41.61 | 40.94 | 41.90 | 42.29 | 44.32 | 42.15 | 44.81 | 43.90 | 45.17 |
The cash conversion cycle is a measure of how efficiently a company manages its working capital, representing the time it takes for a company to convert its investments in inventory back into cash. For CVS Health Corp, the cash conversion cycle has shown a fluctuating trend over the past few quarters.
From March 31, 2020, to December 31, 2024, the cash conversion cycle for CVS Health Corp ranged from a high of 45.60 days to a low of 38.17 days. A lower cash conversion cycle indicates that the company is able to efficiently manage its working capital, while a higher cycle could suggest inefficiencies.
Between March 2020 and June 2022, there was a general downward trend in the cash conversion cycle, indicating potential improvements in inventory management and accounts receivable collections. This trend reversed slightly in the latter half of 2022, with the cycle increasing to 45.60 days by December 31, 2024.
Overall, it is important for CVS Health Corp to continue monitoring and managing its cash conversion cycle to ensure optimal working capital efficiency. Analyzing the factors contributing to fluctuations in the cycle, such as changes in inventory levels, sales trends, and payment terms, can help the company make informed decisions to improve its cash flow management.