Embecta Corp (EMBC)

The liquidity ratios of Embecta Corp have shown a declining trend over the past three years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, decreased from 2.21 in 2022 to 2.03 in 2024. This indicates a slight weakening in the company's short-term liquidity position.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also decreased from 1.54 in 2022 to 1.38 in 2024. The decline in both the current and quick ratios suggests a potential decrease in the company's ability to meet its short-term obligations without relying on inventory.

Furthermore, the cash ratio, which evaluates the company's ability to cover its current liabilities with its cash and cash equivalents, decreased from 1.10 in 2022 to 0.72 in 2024. This significant decline indicates a reduction in the company's immediate liquidity position, as it has less cash available to cover its current liabilities.

Overall, the declining trend in Embecta Corp's liquidity ratios indicates a potential weakening in the company's ability to meet its short-term financial obligations without relying on inventory or other less liquid assets. Further analysis and management attention may be required to address this liquidity challenge.

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Additional liquidity measure

The cash conversion cycle of Embecta Corp has been on an increasing trend over the past three years. In September 2022, the company's cash conversion cycle stood at 50.80 days, indicating that it took approximately 50.80 days for the company to convert its investments in inventory and other resources into cash flows from sales.

By September 2023, the cash conversion cycle had extended to 65.08 days, signifying a slower turnover of cash compared to the previous year. This increase suggests that Embecta Corp took longer to convert its investments into cash during this period.

In September 2024, the cash conversion cycle further increased to 98.68 days. This indicates a significant lengthening of the time it takes for the company to convert its resources into cash inflows from sales. A higher cash conversion cycle implies that the company may be facing challenges in efficiently managing its working capital, potentially affecting its liquidity and overall financial health.

Embecta Corp should closely monitor its cash conversion cycle and look for ways to improve efficiency in managing its inventory, accounts receivable, and accounts payable to enhance its cash flow generation and overall financial performance.