FMC Corporation (FMC)

FMC Corporation's liquidity ratios indicate its ability to meet short-term obligations and the availability of liquid assets.

The current ratio fluctuated over the years but generally remained above 1, indicating that the company has more current assets than current liabilities to cover its short-term debts. The ratio peaked at 1.82 on March 31, 2020, and slightly declined to 1.64 on December 31, 2024. Overall, the current ratio remained at a comfortable level above 1, demonstrating FMC's ability to meet its short-term liabilities.

On the other hand, the quick ratio, which excludes inventory from current assets, provides a more stringent measure of liquidity. FMC's quick ratio varied significantly, with values below 1 on several occasions. This suggests that the company may have difficulties meeting its short-term obligations without relying on inventory sales. Notably, the quick ratio hit its lowest point at 0.00 on December 31, 2021, indicating a potential concern regarding FMC's ability to cover immediate liabilities with its most liquid assets.

The cash ratio, which is the most conservative measure of liquidity, also displayed fluctuations but generally remained at low levels. This ratio assesses the company's ability to cover its current liabilities with cash and cash equivalents alone. FMC's cash ratio ranged from 0.00 to 0.22 over the years, with the highest value recorded on June 30, 2023. The consistently low cash ratio suggests that FMC may rely more on other liquid assets to meet short-term obligations rather than solely on cash reserves.

In conclusion, FMC Corporation's liquidity ratios show a mix of strengths and weaknesses. While the current ratio generally indicates adequate liquidity, the lower quick and cash ratios highlight potential liquidity challenges, especially during periods of low cash reserves. Monitoring these ratios closely can help assess FMC's short-term financial health and liquidity management.

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Additional liquidity measure

The cash conversion cycle for FMC Corporation has fluctuated over the past few years. From March 31, 2020, to June 30, 2022, the company's cash conversion cycle steadily increased from 151.09 days to 186.09 days. This suggests that FMC Corporation was taking longer to convert its investments in inventory into cash during this period.

There was a notable spike in the cash conversion cycle from March 31, 2023, to September 30, 2023, where the cycle increased from 201.56 days to 253.14 days. This sharp increase may indicate potential issues with managing inventory, collecting receivables, or managing payables efficiently during this period.

However, from December 31, 2023, to December 31, 2024, there was a significant improvement in the cash conversion cycle, decreasing from 237.02 days to 169.19 days. This improvement suggests that FMC Corporation was able to streamline its working capital management and optimize its cash flow processes.

Overall, FMC Corporation should continue to monitor its cash conversion cycle to ensure efficient working capital management and strive for a balance between maintaining adequate inventory levels, collecting receivables timely, and managing payables effectively.