Encompass Health Corp (EHC)

Encompass Health Corp's liquidity ratios demonstrate varying levels of short-term solvency over the years analyzed.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 1.32 in 2020 to 1.05 in 2024. This downward trend indicates a potential weakening ability to meet its current liabilities using current assets alone.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also showed a decrease from 0.31 in 2020 to 0.10 in 2024. This suggests a decline in the company's ability to meet its short-term obligations without relying on selling inventory.

The cash ratio, which is the most conservative measure of liquidity focusing solely on cash and cash equivalents, followed a similar downward trend from 0.31 in 2020 to 0.10 in 2024. This highlights a decreasing ability to cover immediate liabilities using only cash resources.

Overall, Encompass Health Corp's liquidity ratios indicate a potential strain on its short-term solvency over the years analyzed, as evidenced by the declining trends in the current ratio, quick ratio, and cash ratio.

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Additional liquidity measure

The cash conversion cycle of Encompass Health Corp has shown a declining trend over the past five years. Starting at 119.06 days at the end of December 31, 2020, it decreased steadily to 0.00 days by the end of December 31, 2024. This indicates that the company has improved its efficiency in managing its cash flows, reducing the time it takes to convert its investments in inventory and other resources into cash receipts from customers.

A lower cash conversion cycle suggests that Encompass Health Corp has been able to streamline its operations, manage its working capital more effectively, and collect payments from customers more promptly. This improvement in cash conversion cycle may have positive implications for the company's liquidity, profitability, and overall financial performance.