HealthStream Inc (HSTM)

Healthstream Inc's liquidity ratios have fluctuated over the past five years.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, has shown some variability. In 2023, the current ratio stands at 1.10, indicating that Healthstream Inc has $1.10 in current assets for every $1 in current liabilities. This ratio has improved compared to 2022 and 2021 but is still lower than in 2019. It is important for the company to maintain a current ratio above 1 to ensure it can cover its short-term debts.

The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, also shows a similar trend as the current ratio. The quick ratio in 2023 is also at 1.10, indicating that the company has $1.10 in liquid assets that can be quickly converted into cash to cover its short-term liabilities. This ratio has shown similar fluctuations as the current ratio over the years.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents to current liabilities, has shown a decreasing trend over the five-year period. In 2023, the cash ratio is at 0.78, indicating that Healthstream Inc has $0.78 in cash and equivalents for every $1 in current liabilities. The decreasing trend in the cash ratio may signal that the company's ability to cover its short-term obligations solely with cash has weakened over the years.

Overall, while the current and quick ratios have shown some improvements in 2023 compared to the previous years, the decreasing cash ratio raises concerns about Healthstream Inc's cash position and its ability to quickly meet its short-term obligations solely with cash reserves. The company should continue to monitor and manage its liquidity position effectively to ensure its financial stability and ability to address short-term financial needs.

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Additional liquidity measure

The cash conversion cycle of Healthstream Inc has shown some fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased to 21.61 days from 29.24 days in 2022, indicating an improvement in its efficiency in managing its cash flow. This reduction suggests the company is taking less time to convert its investments in inventory and other resources into cash.

Compared to 2021 and 2020, where the cash conversion cycle was 29.10 days and 30.59 days respectively, the company has been able to streamline its operations and financial processes more effectively in 2023. However, it is worth noting that the cash conversion cycle was lower in 2019 at 26.73 days compared to the latest figure.

Overall, the decreasing trend in the cash conversion cycle for Healthstream Inc signifies an ongoing effort to enhance the company's liquidity position and operational efficiency, which is a positive indicator of its financial management practices.