Lumen Technologies Inc (LUMN)

Lumen Technologies Inc's liquidity ratios reflect its ability to meet short-term obligations effectively. The current ratio, which measures the company's ability to cover short-term obligations with current assets, has shown improvement over the past five years, increasing from 0.66 in 2019 to 1.35 in 2023. This suggests that Lumen has enhanced its liquidity position and is in a better position to meet its short-term liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. Lumen's quick ratio has varied significantly over the years, ranging from a low of 0.37 in 2021 to a high of 1.26 in 2023. The recent improvement in the quick ratio indicates that the company has strengthened its ability to meet short-term obligations without relying on inventory.

Furthermore, the cash ratio, which measures the ability to cover current liabilities with cash and cash equivalents, has also shown an upward trend for Lumen. The cash ratio increased from 0.33 in 2019 to 0.89 in 2023, indicating that the company has built up a more significant cash buffer to cover its short-term obligations.

Overall, Lumen Technologies Inc's liquidity ratios demonstrate an improving liquidity position, with increasing current, quick, and cash ratios over the years. This signifies that the company has enhanced its ability to meet its short-term financial commitments and has potentially reduced its liquidity risk.

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Additional liquidity measure

The cash conversion cycle of Lumen Technologies Inc has fluctuated over the past five years, ranging from negative 21.83 days in 2019 to positive 2.24 days in 2021. The negative values indicate that the company is efficient in managing its working capital, as it takes less time to convert its investment in inventory and other resources into cash inflows from sales.

A negative cash conversion cycle means that the company is able to collect cash from customers before having to pay its suppliers, which is a favorable position as it lowers the company's need for external financing. However, the substantial variation in the cash conversion cycle over the years suggests that Lumen Technologies may have experienced fluctuations in its operations, impacting its efficiency in managing its working capital.

The significant improvement from a negative 21.83 days in 2019 to a negative 14.21 days in 2023 indicates that the company has managed to streamline its cash conversion process more effectively. Conversely, the positive cash conversion cycle of 2.24 days in 2021 implies that Lumen Technologies took slightly longer to convert its investments into cash during that year.

Overall, a negative cash conversion cycle signifies that Lumen Technologies Inc has been successful in managing its working capital efficiently, but the fluctuations in the cycle highlight the importance of continued monitoring and improvement in the company's operational and financial processes.