Johnson & Johnson (JNJ)

Johnson & Johnson's liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to cover short-term obligations with its current assets, decreased from 1.26 in 2019 to 0.99 in 2023, indicating a potential liquidity concern. However, it has improved slightly in 2023 to 1.16.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown a downward trend over the years, falling from 1.01 in 2019 to 0.77 in 2023. This suggests that the company may have difficulty meeting its immediate liabilities without relying on inventory sales. The cash ratio, which provides the most conservative measure of liquidity by considering only cash and cash equivalents, has followed a similar declining pattern, dropping from 0.60 in 2019 to 0.48 in 2023.

Overall, Johnson & Johnson's liquidity ratios demonstrate a potential liquidity challenge in recent years, as evidenced by the declining trend in the quick and cash ratios. While the current ratio improved slightly in 2023, it remains below ideal levels. The company may need to monitor its liquidity position closely and take proactive measures to ensure it can meet its short-term obligations effectively.

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See also:

Johnson & Johnson Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Johnson & Johnson has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle increased to 85.04 days from 71.28 days in 2022, indicating that it took longer for the company to convert its resources into cash during the most recent year. This trend contrasts with the improving performance in 2022, where the cash conversion cycle decreased significantly to 51.32 days from 57.94 days in 2021.

Looking back further, in 2021, there was a slight increase in the cash conversion cycle to 57.94 days compared to 70.72 days in 2020. This suggests that Johnson & Johnson experienced a more efficient conversion of its investments into cash in 2021. However, a notable decrease occurred in 2020, where the cash conversion cycle decreased to 70.72 days from 2019's 80.48 days, reflecting improved efficiency in managing its working capital.

Overall, the fluctuation in Johnson & Johnson's cash conversion cycle over the past five years indicates varying efficiency levels in managing its cash, receivables, and payables. It is essential for the company to closely monitor and manage its working capital cycle to ensure optimal cash flow and operational efficiency in the future.