HP Inc (HPQ)
Liquidity ratios
| Oct 31, 2024 | Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.72 | 0.73 | 0.75 | 0.76 | 0.79 |
| Quick ratio | 0.37 | 0.36 | 0.17 | 0.42 | 0.48 |
| Cash ratio | 0.11 | 0.13 | 0.12 | 0.15 | 0.20 |
HP Inc's liquidity ratios, as indicated by the current ratio, quick ratio, and cash ratio, have shown a declining trend over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has decreased from 0.79 in 2020 to 0.72 in 2024. This indicates that HP Inc may be experiencing challenges in meeting its short-term obligations using its current assets.
The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown a downward trend, dropping from 0.48 in 2020 to 0.37 in 2024. This suggests that HP Inc's ability to pay off immediate liabilities without relying on inventory has weakened over the years.
Furthermore, the cash ratio, which reflects the company's ability to cover its current liabilities with cash and cash equivalents, has also declined from 0.20 in 2020 to 0.11 in 2024. This implies that HP Inc may not have sufficient cash on hand to meet its short-term obligations.
Overall, the decreasing trend in HP Inc's liquidity ratios over the past five years raises concerns about the company's short-term liquidity position and its ability to meet its financial obligations promptly. Management may need to implement strategies to improve cash flow management and enhance liquidity levels to mitigate potential liquidity risks.
See also:
Additional liquidity measure
| Oct 31, 2024 | Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -30.57 | -24.17 | -48.04 | -14.28 | -20.90 |
The cash conversion cycle provides insight into how efficiently a company manages its working capital by measuring the time it takes to convert inventory into cash. A negative cash conversion cycle indicates that the company is able to collect cash from customers before paying its suppliers for inventory, which is generally favorable.
HP Inc has shown varying trends in its cash conversion cycle over the past five years. In fiscal year 2024, the company's cash conversion cycle stood at -30.57 days, indicating that HP Inc was able to convert inventory into cash more quickly than in the previous year. This improvement suggests that the company was efficient in managing its working capital by collecting cash from customers in a timely manner.
Comparing this to fiscal year 2023, where the cash conversion cycle was -24.17 days, we observe a further improvement in efficiency. The lower number of days indicates that HP Inc managed to further speed up the process of converting inventory into cash, reflecting improved working capital management practices.
However, in fiscal year 2022, the cash conversion cycle spiked to -48.04 days, signaling a longer duration for HP Inc to convert inventory into cash compared to the preceding years. This could indicate challenges in managing working capital efficiently during that period.
In fiscal years 2021 and 2020, the cash conversion cycles were -14.28 days and -20.90 days, respectively. Both years showed improvement compared to fiscal year 2022, indicating that HP Inc was able to shorten the time it took to convert inventory into cash.
Overall, HP Inc's cash conversion cycle has fluctuated over the past five years, with some years showing improvements in efficiency while others experiencing challenges. Monitoring this metric can provide insights into the company's working capital management practices and financial health.