Merck & Company Inc (MRK)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.36 | 1.25 | 1.47 | 1.27 | 1.02 |
| Quick ratio | 0.88 | 0.71 | 0.93 | 0.73 | 0.65 |
| Cash ratio | 0.51 | 0.31 | 0.54 | 0.34 | 0.36 |
Based on the provided data, let's analyze Merck & Company Inc's liquidity ratios:
1. Current Ratio:
- Merck's current ratio has shown a gradual improvement over the years, increasing from 1.02 in 2020 to 1.36 in 2024.
- The current ratio indicates that Merck had $1.36 in current assets for every $1 in current liabilities as of December 31, 2024.
- Overall, the current ratio reflects a relatively stable and healthy liquidity position for Merck, with the ability to cover its short-term obligations.
2. Quick Ratio:
- Merck's quick ratio has also exhibited a positive trend, rising from 0.65 in 2020 to 0.88 in 2024.
- The quick ratio considers only the most liquid assets to cover current liabilities, excluding inventory from current assets.
- The improvement in the quick ratio suggests a strengthening ability of Merck to meet its short-term obligations without relying on inventory liquidation.
3. Cash Ratio:
- Merck's cash ratio fluctuated over the years, reaching a peak of 0.54 in 2022.
- The cash ratio indicates the proportion of cash and cash equivalents to cover current liabilities.
- Although the cash ratio dipped in 2023, it recovered to 0.51 by the end of 2024, suggesting Merck's ability to rely on cash reserves for short-term obligations.
Overall, the liquidity ratios of Merck & Company Inc demonstrate a stable and improving liquidity position over the years, with adequate levels of current assets to cover short-term liabilities. The company's ability to meet its financial obligations and manage liquidity risks appears to be sound based on the analysis of these ratios.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 84.81 | 92.95 | 77.35 | 88.33 | 84.04 |
Merck & Company Inc's cash conversion cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales. The trend in the cash conversion cycle over the five-year period shows some variations.
In 2020, the cash conversion cycle was 84.04 days, indicating that Merck took approximately 84 days to convert its investments into cash. This increased slightly to 88.33 days in 2021, suggesting a longer time for the company to receive cash from its sales activities.
However, in 2022, there was a significant improvement in the cash conversion cycle, decreasing to 77.35 days. This suggests that Merck became more efficient in managing its working capital and converting its investments into cash more quickly.
In 2023, there was a notable increase in the cash conversion cycle to 92.95 days, indicating a prolonged period for cash inflows relative to the previous year. This may be a result of various factors such as changes in sales patterns or inventory management.
Finally, by the end of 2024, the cash conversion cycle decreased to 84.81 days, showing a slight improvement compared to 2023 but still higher than the more efficient cycle observed in 2022.
Overall, fluctuations in the cash conversion cycle for Merck & Company Inc over the five-year period suggest changes in the company's efficiency in managing working capital and converting investments into cash. It is essential for the company to continue monitoring and improving its cash conversion cycle to enhance its liquidity and operational performance.