Merck & Company Inc (MRK)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.25 | 1.47 | 1.27 | 1.02 | 1.24 |
| Quick ratio | 0.71 | 0.93 | 0.73 | 0.65 | 0.85 |
| Cash ratio | 0.31 | 0.54 | 0.34 | 0.36 | 0.54 |
Liquidity ratios provide insights into a company's ability to meet its short-term obligations. Looking at Merck & Co Inc's liquidity ratios over the past five years, we can observe the following trends:
1. Current Ratio: This ratio measures the company's ability to cover its short-term liabilities with its current assets. Merck's current ratio has fluctuated over the past five years, ranging from a low of 1.02 in 2020 to a high of 1.47 in 2022. A current ratio above 1 indicates that the company has more current assets than current liabilities, demonstrating a healthy liquidity position.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Merck's quick ratio has also varied over the years, with a low of 0.79 in 2020 and a high of 1.23 in 2022. A quick ratio above 1 suggests that the company can meet its short-term obligations without relying on selling inventory.
3. Cash Ratio: The cash ratio is the most conservative measure of liquidity, representing the proportion of immediate cash and cash equivalents to current liabilities. Merck's cash ratio has shown some fluctuations, with a low of 0.50 in 2020 and a high of 0.84 in 2022. A cash ratio below 1 indicates that the company may need to rely on sources other than cash to meet its short-term obligations.
Overall, Merck & Co Inc has generally maintained healthy liquidity levels, as indicated by the current ratio consistently above 1, quick ratio above 1 in most years, and a cash ratio trending around 0.60 to 0.84. These ratios suggest that the company has the ability to meet its short-term financial obligations without significant liquidity constraints.
See also:
Merck & Company Inc Liquidity Ratios
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 92.95 | 77.35 | 88.33 | 84.04 | 92.59 |
The cash conversion cycle of Merck & Co Inc has shown some fluctuations in recent years. In 2023, the company's cash conversion cycle increased to 117.97 days from 92.71 days in 2022, indicating a longer period required to convert its investments in inventory and accounts receivable into cash.
Comparing to the previous years, the cash conversion cycle was higher than in 2021 (105.17 days) and 2020 (100.16 days). This suggests that Merck & Co Inc took longer to convert its resources into cash in 2023 compared to the prior years.
However, the cash conversion cycle in 2023 was lower than in 2019 (110.75 days), implying some improvement in the efficiency of the company's working capital management. Overall, the trend in the cash conversion cycle of Merck & Co Inc indicates fluctuation over the years, with 2023 showing a longer cash conversion cycle compared to the immediate prior years.