KBR Inc (KBR)

Based on the data provided for KBR Inc's liquidity ratios, we can observe the following trends:

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term obligations with its current assets. KBR Inc's current ratio has been fluctuating over the past five years, ranging from 0.96 to 1.34. A current ratio of 1 indicates that the company has just enough current assets to cover its current liabilities. With a current ratio of 1.05 in 2023, KBR Inc's ability to meet its short-term obligations has slightly improved compared to the previous year.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. KBR Inc's quick ratio has also shown fluctuations over the past five years, ranging from 0.74 to 1.12. A quick ratio below 1 indicates that the company may have difficulty meeting its short-term obligations without relying on selling inventory. With a quick ratio of 0.84 in 2023, KBR Inc's liquidity position has weakened compared to the previous year.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, focusing solely on the company's ability to cover its current liabilities with cash and cash equivalents. KBR Inc's cash ratio has been declining over the past five years, indicating a decreasing ability to meet short-term obligations using cash on hand. A cash ratio below 1 suggests that the company may struggle to cover its current liabilities using only cash resources. With a cash ratio of 0.19 in 2023, KBR Inc's cash position has deteriorated further compared to the previous year.

In summary, KBR Inc's liquidity ratios suggest a mixed picture of its ability to meet short-term obligations. While the current ratio indicates a slight improvement in liquidity in 2023, both the quick ratio and cash ratio highlight potential challenges in covering short-term liabilities, especially concerning the company's dwindling cash position. It is important for stakeholders to monitor these liquidity ratios closely to assess KBR Inc's ability to manage its short-term financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle is a key metric that measures how efficiently a company manages its working capital, including accounts receivable, inventory, and accounts payable. In the case of KBR Inc, the cash conversion cycle has fluctuated over the past five years.

In 2023, the cash conversion cycle for KBR Inc was 21.40 days, higher than the previous year, indicating that the company took longer to convert its investments in inventory and accounts receivable into cash. This may suggest potential inefficiencies in managing its working capital during that period.

Comparing 2023 to 2022, the increase in the cash conversion cycle suggests that KBR Inc may have been carrying higher levels of inventory or experiencing delays in receiving payments from customers.

It is important for KBR Inc to closely monitor and manage its cash conversion cycle to ensure optimal utilization of resources and maintain healthy cash flows. A longer cash conversion cycle can tie up cash resources and impact overall liquidity and profitability. Analyzing trends in the cash conversion cycle can provide insights into the company's operational efficiency and effectiveness in managing working capital.