Chevron Corp (CVX)

Chevron Corp.'s liquidity ratios indicate its ability to meet short-term obligations and cover immediate liabilities. The current ratio has fluctuated over the years, ranging from 1.07 in 2019 to 1.47 in 2022, with a value of 1.27 as of December 31, 2023. This suggests that Chevron has $1.27 in current assets for every dollar of current liabilities, indicating a generally stable ability to pay off short-term debts.

The quick ratio, which excludes inventory from current assets, paints a slightly more conservative picture. It ranged from 0.85 in 2019 to 1.23 in 2022, with a value of 1.01 as of December 31, 2023. This ratio indicates Chevron's ability to meet short-term obligations using its most liquid assets, with a value above 1 demonstrating a good short-term liquidity position.

The cash ratio, which is the most stringent measure of liquidity as it considers only cash and cash equivalents, also shows a fluctuating trend for Chevron. Ranging from 0.35 in 2019 to 0.63 in 2022, the cash ratio was reported at 0.39 as of December 31, 2023. The cash ratio indicates the company's ability to cover current liabilities with its available cash on hand.

Overall, Chevron Corp.'s liquidity ratios suggest that the company has maintained a strong ability to meet its short-term obligations over the past five years, despite some fluctuations in the ratios. The current and quick ratios are generally above 1, indicating a solid liquidity position, while the cash ratio provides insight into the company's direct cash coverage of immediate liabilities.

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See also:

Chevron Corp Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle measures how long it takes for a company to convert its investments in inventory and other resources into cash flows. A shorter cash conversion cycle indicates better efficiency in managing working capital and generating cash.

Looking at the trend for Chevron Corp. over the past five years, we observe fluctuations in the cash conversion cycle. In 2019, the company had a negative cash conversion cycle of -2.84 days, implying that Chevron was able to convert its investments into cash before having to pay its suppliers. This may indicate strong management of inventory and receivables during that period.

However, in 2020, the cash conversion cycle increased significantly to 6.19 days, suggesting a lengthening of the time taken to convert investments into cash. This increase may indicate potential issues with managing working capital efficiently or delays in collecting cash from customers.

In 2021, Chevron managed to reduce its cash conversion cycle to 1.76 days, showing an improvement in working capital management compared to the previous year. This indicates that the company was able to sell inventory and collect cash more quickly while managing payables effectively.

In 2022, the cash conversion cycle increased to 4.80 days, indicating a slight dip in efficiency compared to the previous year. This increase may be attributed to changes in inventory management practices or delays in the collection of receivables.

Finally, in 2023, Chevron was able to significantly reduce its cash conversion cycle to 0.76 days, indicating strong efficiency in converting investments into cash. This improvement suggests that the company may have optimized its working capital management practices and improved its cash flow generation.

Overall, the trend in Chevron's cash conversion cycle shows variability over the years, with fluctuations indicating changes in working capital management efficiency. A lower cash conversion cycle is generally favorable as it signifies the company is able to generate cash quickly from its operations, which can contribute to overall financial health and liquidity.