ODP Corp (ODP)

ODP Corp's liquidity ratios provide insights into the company's ability to meet its short-term financial obligations. Looking at the current ratio, which measures the company's ability to pay off its current liabilities with its current assets, we see a slight decline from 1.03 in 2022 to 0.99 in 2023. This indicates that ODP Corp may have slightly less liquidity to cover its short-term obligations compared to the previous year.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. ODP Corp's quick ratio has been relatively low over the years, ranging from 0.45 to 0.68. The declining trend in the quick ratio may suggest potential difficulties in meeting immediate liabilities without relying on selling inventory, which could pose a risk during times of financial stress.

Furthermore, the cash ratio, which is the most conservative liquidity measure, reflects the proportion of current liabilities that can be covered by cash and cash equivalents. ODP Corp's cash ratio has been relatively stable over the years, ranging from 0.22 to 0.35. Although the cash ratio increased in 2023 compared to 2022, it remains relatively low, indicating that ODP Corp relies heavily on non-cash current assets to meet its short-term obligations.

In summary, ODP Corp's liquidity ratios suggest a potential liquidity challenge, as indicated by a decreasing current ratio and a consistently low quick ratio. Management should closely monitor these ratios and evaluate strategies to improve liquidity, such as managing working capital more efficiently or securing additional sources of liquidity.

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Additional liquidity measure

The cash conversion cycle for ODP Corp has fluctuated over the past five years. In 2023, the cash conversion cycle decreased to 23.23 days from 23.38 days in 2022. However, compared to 2021 when it was at 17.44 days, the cycle has increased. In 2020, the cycle was at 23.73 days, showing a slight decrease in 2023. The most significant improvement was from 2019 when the cycle was at a high of 49.21 days.

Overall, ODP Corp has shown some variability in its cash conversion cycle. It is important to monitor this metric to ensure efficient management of cash flows, accounts receivable, and inventory to optimize working capital utilization.