McKesson Corporation (MCK)
Liquidity ratios
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | |
|---|---|---|---|---|---|
| Current ratio | 0.90 | 0.92 | 0.92 | 0.95 | 1.03 |
| Quick ratio | 0.51 | 0.50 | 0.50 | 0.46 | 0.58 |
| Cash ratio | 0.09 | 0.09 | 0.10 | 0.07 | 0.14 |
McKesson Corporation's liquidity ratios show a gradual decline over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has decreased from 1.03 in March 2021 to 0.90 in March 2025. This indicates that the company may be having difficulty covering its short-term liabilities with its current assets.
Similarly, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also decreased from 0.58 in March 2021 to 0.51 in March 2025. This suggests that McKesson Corporation's ability to meet its short-term obligations without relying on inventory has weakened over the years.
Lastly, the cash ratio, which specifically examines the company's ability to cover its current liabilities with cash and cash equivalents, has shown a slight decrease from 0.14 in March 2021 to 0.09 in March 2025. While the cash ratio has remained relatively stable compared to the other ratios, it still indicates a decline in the company's liquidity position.
Overall, the downward trend in McKesson Corporation's liquidity ratios raises concerns about its short-term financial health and ability to meet its obligations as they come due.
See also:
Additional liquidity measure
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -8.06 | -6.42 | -5.88 | -2.51 | -2.46 |
The cash conversion cycle of McKesson Corporation has shown a consistent trend of improvement over the past five years. From March 31, 2021, to March 31, 2025, the company's cash conversion cycle has decreased from -2.46 days to -8.06 days.
A negative cash conversion cycle indicates that McKesson is efficient in managing its working capital, as it is able to convert its inventory into cash quickly, pay its suppliers, and collect receivables in a shorter period compared to the time taken to pay its own payables.
The significant decrease in the cash conversion cycle over the five-year period suggests that McKesson has been successful in optimizing its working capital management processes. This improvement is favorable as it indicates that the company is effective in generating cash from its operating activities, enhancing its liquidity position, and potentially reducing its financing costs.