Leidos Holdings Inc (LDOS)

The liquidity ratios of Leidos Holdings Inc have fluctuated over the years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has shown some volatility but generally remained above 1 since 2019, indicating a reasonable level of liquidity. However, there was a slight dip in mid-2020 and late 2022 where the current ratio fell below 1, raising concerns about the company's short-term liquidity position during those periods.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, followed a similar trend as the current ratio. It also generally stayed above 1 since 2019, suggesting that the company could meet its short-term obligations without relying on selling inventory. Similar to the current ratio, there were periods in mid-2020 and late 2022 when the quick ratio dropped below 1, indicating potential liquidity challenges during those specific quarters.

The cash ratio, a conservative measure of liquidity that evaluates the company's ability to cover its current liabilities with only its cash and cash equivalents, displayed a varying pattern over the years. While there were fluctuations, the cash ratio generally stayed at a reasonable level above 0.1 since 2019, implying that the company had a sufficient level of cash to meet its short-term obligations. Notably, the cash ratio improved significantly in late 2023 and late 2024, indicating a strengthened cash position during those periods.

Overall, the liquidity ratios of Leidos Holdings Inc suggest that the company has maintained a relatively stable liquidity position over the years, with occasional fluctuations that may require close monitoring to ensure adequate liquidity management.

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Additional liquidity measure

The cash conversion cycle is a key metric that measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. For Leidos Holdings Inc, the trend of the cash conversion cycle over the past few years shows fluctuations but generally within a certain range.

In December 2019, the cash conversion cycle stood at 37.17 days, reflecting a relatively efficient conversion of cash. However, this figure increased to 57.38 days by March 2020, indicating a lengthening of the cycle. This trend continued with further increases in the cycle duration, reaching a peak of 72.04 days by March 2022.

Following the peak, there was a slight decrease in the cash conversion cycle, dropping to 45.64 days by December 2023. This reduction suggests that the company was able to manage its working capital more effectively, leading to quicker cash conversions. However, by December 2024, the cycle lengthened again to 48.18 days, although still lower than the peak in 2022.

Analyzing the cash conversion cycle helps in evaluating how efficiently Leidos Holdings Inc manages its working capital and operational activities. A shorter cycle implies quicker cash generation, reduced reliance on external financing, and potentially improved liquidity. The fluctuations observed in the cycle indicate changes in the company's efficiency in managing its cash flow, inventory, and receivables over time. It would be important to monitor this metric closely to ensure continuous improvement in working capital management and overall financial performance.