Laboratory Corporation of America Holdings (LH)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.17 | 1.36 | 2.35 | 1.63 | 1.50 | 1.73 | 1.90 | 1.98 | 1.92 | 2.08 | 2.13 | 1.67 | 1.66 | 1.36 | 1.12 | 1.18 | 1.12 | 1.17 | 1.14 | 1.14 |
| Quick ratio | 0.76 | 0.92 | 1.75 | 0.95 | 0.86 | 1.02 | 1.24 | 1.31 | 1.34 | 1.52 | 1.60 | 1.28 | 1.26 | 0.94 | 0.73 | 0.73 | 0.71 | 0.78 | 0.75 | 0.76 |
| Cash ratio | 0.17 | 0.25 | 0.88 | 0.14 | 0.14 | 0.16 | 0.40 | 0.47 | 0.53 | 0.71 | 0.77 | 0.59 | 0.45 | 0.24 | 0.18 | 0.13 | 0.13 | 0.15 | 0.12 | 0.14 |
The current ratio of Laboratory Corp. Of America Holdings has fluctuated over the past eight quarters, ranging from 1.17 to 2.35. A current ratio above 1 indicates that the company has more current assets than current liabilities to cover its short-term obligations. The current ratio peaked at 2.35 in Q2 2023, suggesting strong liquidity position, but saw a significant drop in Q4 2023 to 1.17, which may indicate potential challenges in meeting short-term obligations.
The quick ratio, which excludes inventory from current assets, provides a more stringent measure of liquidity. It ranged from 1.02 to 2.12 over the same period. The company's ability to meet its short-term obligations without relying on selling inventory improved over time, with the quick ratio reaching a peak of 2.12 in Q2 2023.
The cash ratio, which is the most conservative liquidity measure, shows the ability of the company to cover its current liabilities with cash and cash equivalents. The cash ratio varied from 0.37 to 1.19 during the eight quarters analyzed. The cash ratio reached its highest level in Q3 2022 at 0.66, indicating a strong ability to cover short-term obligations with cash reserves.
Overall, while the current ratio and quick ratio demonstrate fluctuation, the cash ratio seems to have shown more stability and a positive trend, reflecting a cautious approach in maintaining sufficient cash reserves to meet immediate financial obligations. It would be important for Laboratory Corp. Of America Holdings to closely monitor and manage its liquidity position to ensure it can meet its short-term liabilities effectively.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 40.23 | 37.79 | 37.07 | 41.95 | 39.08 | 45.50 | 42.25 | 44.94 | 43.24 | 42.41 | 42.74 | 47.92 | 56.03 | 50.95 | 44.45 | 33.01 | 31.73 | 35.20 | 36.92 | 34.42 |
The cash conversion cycle of Laboratory Corp. Of America Holdings has shown some fluctuations over the past eight quarters. It measures the time it takes for the company to convert its resources invested in inventory and accounts receivable into cash inflows from customers.
The company's cash conversion cycle ranged from a low of 44.88 days in Q2 2023 to a high of 63.66 days in Q1 2022, indicating variability in the efficiency of their working capital management. Generally, a lower cash conversion cycle is preferable as it signifies that the company is able to quickly convert its investments into cash.
It is also notable that there was a significant increase in the cash conversion cycle from Q4 2022 to Q1 2023, suggesting potential delays in collecting receivables or managing inventory levels during that period. This rise was followed by a downward trend in subsequent quarters, indicating an improvement in the management of working capital.
Overall, management should closely monitor the cash conversion cycle to ensure efficient utilization of resources and timely conversion of investments into cash inflows. This metric plays a crucial role in the company's liquidity and operational efficiency.