International Paper (IP)

International Paper Co.'s liquidity ratios have shown varying trends over the past five years, indicating fluctuations in its ability to meet short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- International Paper's current ratio has generally been above 1, indicating that it has had sufficient current assets to cover its current liabilities.
- The current ratio improved from 2019 to 2021, peaked in 2021 at 1.71, before slightly dropping in 2022 and increasing again in 2023 to 1.67.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets.
- International Paper's quick ratio has also shown fluctuations over the years, but overall, it has been above 1, indicating a relatively healthy ability to meet short-term obligations.
- The quick ratio improved from 2019 to 2021, with a peak in 2021 at 1.27, then dropped in 2022 before increasing in 2023 to 1.19.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, focusing only on the company's ability to cover its current liabilities with cash and cash equivalents.
- International Paper's cash ratio has been relatively low but above 0, showing that it has had some ability to cover its short-term obligations with cash on hand.
- The cash ratio increased significantly from 2019 to 2020, showing a peak in 2020 at 0.72, before gradually decreasing in the following years.

In summary, International Paper Co. has demonstrated fluctuations in its liquidity ratios over the past five years. While the current and quick ratios have generally been healthy, the cash ratio has been low compared to the other liquidity ratios. Continuous monitoring of these ratios is essential to ensure the company's ability to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of International Paper Co. has been relatively fluctuating over the past five years. In 2023, the company's cash conversion cycle was 44.22 days, showing an increase compared to the previous year's 38.18 days. However, it was lower than the levels seen in 2020 and 2019 when it was 47.49 days and 48.36 days, respectively.

The cash conversion cycle measures the time it takes for a company to convert its investment in inventory into cash flow from sales. A lower cash conversion cycle indicates that the company is more efficient in managing its working capital and converting its inventory into cash. Conversely, a higher cash conversion cycle may suggest inefficiencies in managing inventory, accounts receivable, and accounts payable.

Overall, International Paper Co. should aim to continuously monitor and improve its cash conversion cycle to optimize its working capital management and enhance its overall financial performance.