Fortrea Holdings Inc. (FTRE)

Fortrea Holdings Inc.'s liquidity ratios indicate the company's ability to meet its short-term obligations. The current ratio, which measures the company's short-term solvency, shows a declining trend from 1.47 on March 31, 2024, to 1.00 on December 31, 2024. While the current ratio above 1 suggests the company has sufficient current assets to cover its current liabilities, a decreasing trend may indicate potential challenges in meeting its short-term obligations.

The quick ratio, a more conservative measure of liquidity that excludes inventory from current assets, also shows a decline from 0.55 on March 31, 2024, to 0.28 on both September 30, 2024, and December 31, 2024. This decreasing trend raises concerns about the company's ability to meet its immediate liabilities using its most liquid assets.

The cash ratio, which focuses solely on cash and cash equivalents to cover current liabilities, fluctuates between 0.11 and 0.17 during the year, then settles at 0.12 on December 31, 2024. Although the cash ratio is relatively low, indicating that the company may struggle to meet its short-term obligations using only cash on hand, the consistency in this ratio suggests a stable cash position.

Overall, Fortrea Holdings Inc.'s liquidity ratios suggest a need for further monitoring of its ability to meet short-term obligations, especially if the declining trends in the current and quick ratios persist.

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Additional liquidity measure

Fortrea Holdings Inc.'s cash conversion cycle has fluctuated over the course of the year 2024. From March to June 2024, the company's cash conversion cycle decreased significantly from 37.61 days to -10.44 days, indicating that its liquidity improved as it took less time to convert its investments in inventory back into cash.

However, in the following quarters, September and December 2024, the cash conversion cycle remained negative at -1.21 days and 3.28 days, respectively. This suggests that the company has been able to manage its working capital efficiently, with a negative cycle indicating that it is receiving funds from sales before paying its suppliers.

Overall, Fortrea Holdings Inc. has shown improving efficiency in managing its working capital over the year 2024, as indicated by the decreasing trend in its cash conversion cycle. It is important for the company to sustain this level of efficiency to ensure healthy cash flows and liquidity in the future.