The Coca-Cola Company (KO)

Coca-Cola Co's liquidity ratios have shown some fluctuations over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has ranged from 0.76 to 1.32. A current ratio above 1 indicates that the company has more current assets than current liabilities, with a higher ratio considered more favorable. Coca-Cola's current ratio has generally been above 1, indicating a healthy liquidity position, although it decreased slightly in 2023 compared to the previous year.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Coca-Cola's quick ratio has ranged from 0.63 to 1.09, with the highest level in 2020. A quick ratio above 1 suggests that the company can meet its short-term liabilities without relying on selling inventory, which is generally seen as a positive sign. While the quick ratio has fluctuated, it has generally remained close to or slightly below 1, indicating a relatively stable liquidity position.

The cash ratio, which is the most conservative liquidity measure, focuses solely on cash and cash equivalents compared to current liabilities. Coca-Cola's cash ratio has ranged from 0.48 to 0.88, with the highest level in 2020. A cash ratio above 1 would mean that the company has more cash than current liabilities, which is considered a very strong liquidity position. Coca-Cola's cash ratio has consistently been below 1, but the company has maintained a sufficient cash position to cover its short-term obligations.

Overall, Coca-Cola Co has demonstrated a reasonably strong liquidity position over the past five years, as indicated by its current, quick, and cash ratios. While there have been some fluctuations, the company's ability to meet its short-term obligations with its current assets, excluding inventory, and cash reserves appears to be adequate.

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See also:

The Coca-Cola Company Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Coca-Cola Co has fluctuated over the past five years. In 2023, the company's cash conversion cycle improved significantly to 4.22 days, indicating that it took on average 4.22 days to convert its investments in inventory and other resources into cash from sales. This represents a more efficient management of working capital compared to the previous year, where the cycle was 7.82 days.

Looking back at 2021, Coca-Cola Co had a cash conversion cycle of 4.93 days, which was relatively consistent with 2023. However, there was a significant improvement compared to 2020 when the company struggled with a much longer cash conversion cycle of 27.94 days. Similarly, in 2019, the cash conversion cycle was 28.28 days, highlighting a continuation of inefficiencies in working capital management.

Overall, the fluctuations in the cash conversion cycle suggest that Coca-Cola Co has been actively working to improve its management of working capital and enhance efficiency in converting investments into cash flows from sales. The reduction in the cash conversion cycle in 2023 reflects positive developments in the company's operations and financial performance.