Keurig Dr Pepper Inc (KDP)

Keurig Dr Pepper Inc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, indicate the company's ability to meet its short-term obligations using its current assets. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has shown fluctuation over the past five years, ranging from 0.31 to 0.47. A current ratio below 1 suggests a potential liquidity issue, and Keurig Dr Pepper Inc's current ratio has consistently been below this benchmark, indicating that it may have difficulty meeting its current obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Keurig Dr Pepper Inc's quick ratio has similarly fluctuated between 0.21 and 0.33 over the past five years, remaining below the acceptable benchmark of 1. This indicates that the company may struggle to meet its short-term obligations without relying on selling inventory.

Lastly, the cash ratio, which measures a company's ability to cover its current liabilities with its cash and cash equivalents, has ranged from 0.04 to 0.14 for Keurig Dr Pepper Inc. The company's cash ratio has also been consistently below 1, implying a limited capacity to cover immediate liabilities solely with cash on hand.

Overall, the downward trend in these liquidity ratios suggests that Keurig Dr Pepper Inc may face challenges in meeting its short-term financial obligations without resorting to additional financing or asset liquidation. It would be prudent for stakeholders to closely monitor the company's liquidity position and assess potential strategies to improve its short-term solvency.

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Keurig Dr Pepper Inc Liquidity Ratios

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Additional liquidity measure

Keurig Dr Pepper Inc's cash conversion cycle has exhibited fluctuations over the past five years. The company has shown an improvement in its efficiency in managing cash flows from operations, as indicated by a reduction in the cash conversion cycle from -153.80 days in 2019 to -95.64 days in 2023. This trend suggests that Keurig Dr Pepper has been able to convert its inventory into sales at a faster pace and collect cash from customers more efficiently.

The negative values of the cash conversion cycle indicate that Keurig Dr Pepper's operating cycle is shorter than its payment cycle, resulting in a net inflow of cash from operations. The company has been able to effectively manage its working capital, indicating strong liquidity and potentially lower financing needs. However, in 2022 and 2021, the cash conversion cycle was more negative than in 2023, potentially suggesting a temporary weakening in the company's operational efficiency.

Overall, Keurig Dr Pepper Inc's cash conversion cycle analysis indicates a generally efficient management of working capital, with recent improvements signaling enhanced operational performance and potential financial strength. However, monitoring future trends in the cash conversion cycle will be important to assess the company's ongoing ability to convert sales into cash effectively.