McKesson Corporation (MCK)

The liquidity ratios of McKesson Corporation indicate the company's ability to meet its short-term obligations effectively. The current ratio has been relatively stable over the past five years, ranging from 0.92 to 1.03. While a current ratio above 1 is generally considered healthy, McKesson's current ratio has consistently been slightly below this benchmark.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also remained relatively stable between 0.46 and 0.58 over the same period. This suggests that McKesson may have difficulty meeting its short-term obligations using only its most liquid assets.

The cash ratio, which focuses solely on cash and cash equivalents relative to current liabilities, has fluctuated between 0.08 and 0.15. A lower cash ratio indicates a higher reliance on non-cash current assets to meet short-term obligations.

Overall, the liquidity ratios of McKesson Corporation show a consistent trend of lower liquidity levels, particularly in terms of quick and cash ratios. This may indicate a potential need for the company to enhance its liquidity management strategies to ensure it can meet financial obligations efficiently in the short term.

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See also:

McKesson Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of McKesson Corporation has been fluctuating over the past five years, with a notable improvement from a positive cycle in 2020 to negative cycles in subsequent years. The company's cash conversion cycle was -5.49 days as of March 31, 2024, indicating that on average, McKesson takes approximately 5.49 days to convert its investments in inventory and accounts receivable into cash from sales revenue.

This trend suggests that McKesson has been effectively managing its working capital and operating efficiency. The negative cash conversion cycle implies that the company is able to collect cash from customers before paying its suppliers, which can help improve liquidity and overall financial health. This efficient management of the cash conversion cycle indicates that McKesson may have strong inventory turnover and accounts receivable collection processes in place.

Overall, the consistent negative cash conversion cycle over the past few years reflects McKesson's ability to efficiently manage its working capital and convert its resources into cash quickly, which is a positive indicator of the company's financial performance and operational efficiency.