Quest Diagnostics Incorporated (DGX)

Quest Diagnostics Incorporated's liquidity ratios have shown fluctuations over the past five years.

1. Current Ratio: This ratio indicates the company's ability to meet its short-term obligations with its current assets. In 2020, the current ratio was 1.72, suggesting that Quest had $1.72 in current assets for every $1 in current liabilities. However, this ratio decreased to 1.56 in 2021, 1.22 in 2022, and then increased slightly to 1.31 in 2023 before dropping to 1.10 in 2024. The declining trend from 2020 to 2024 indicates a potential weakening in Quest's ability to cover its short-term liabilities with its current assets.

2. Quick Ratio: The quick ratio provides a more stringent measure of liquidity as it excludes inventory from current assets. Quest's quick ratio was 0.95 in 2020, indicating that the company had less liquid assets to cover its short-term liabilities. This ratio declined sharply to 0.52 in 2021 and continued to decrease to 0.20 in 2022 before gradually improving to 0.38 in 2023 and 0.25 in 2024. The decreasing trend in the quick ratio highlights a potential liquidity challenge for Quest over the years.

3. Cash Ratio: The cash ratio specifically measures the company's ability to cover its short-term liabilities with cash and cash equivalents only. Like the quick ratio, the cash ratio decreased from 2020 to 2022, indicating a potential strain on Quest's liquidity position. Quest's cash ratio was 0.95 in 2020, but dropped to 0.52 in 2021, and further declined to 0.20 in 2022. It then improved slightly to 0.38 in 2023 and 0.25 in 2024, signaling a better ability to cover short-term obligations with cash and equivalents.

In summary, Quest Diagnostics has experienced fluctuating liquidity ratios over the five-year period, with potential challenges in covering short-term obligations with current and quick assets. Management may need to closely monitor and potentially improve the company's liquidity position to ensure financial stability and meet its operational needs.

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Additional liquidity measure

The cash conversion cycle of Quest Diagnostics Incorporated has shown a decreasing trend over the past five years, indicating improved efficiency in managing its cash flows. In 2020, the company's cash conversion cycle was 14.02 days, which decreased to 11.54 days in 2021. This trend continued with further reductions to 10.87 days in 2022, 11.19 days in 2023, and a significant decrease to 10.35 days in 2024.

A declining cash conversion cycle suggests that Quest Diagnostics has been able to convert its resources into cash more quickly, potentially through more efficient inventory management, accounts receivable collection, and accounts payable payment processes. This is a positive indicator of the company's financial health and management effectiveness in utilizing its working capital.

Overall, the decreasing trend in the cash conversion cycle reflects improved liquidity and operational efficiency for Quest Diagnostics Incorporated, indicating its ability to generate cash and manage its working capital effectively over the years.