Organon & Co (OGN)

Organon & Co.'s liquidity ratios provide insight into the company's ability to meet its short-term financial obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown a slight decline over the past five years, from 2.95 in 2019 to 1.54 in 2023. Although the current ratio has decreased, it still indicates that Organon & Co. has sufficient current assets to cover its current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Organon & Co.'s quick ratio has also shown a decreasing trend, from 2.15 in 2019 to 1.09 in 2023. This may suggest a reduced ability to meet short-term obligations without relying on inventory sales.

The cash ratio, the most conservative liquidity measure, focuses solely on the company's cash and cash equivalents relative to its current liabilities. Organon & Co.'s cash ratio has declined over the past five years, from 1.05 in 2019 to 0.50 in 2023. This indicates a decrease in the company's ability to cover its short-term liabilities with its cash holdings alone.

Overall, while Organon & Co. still maintains adequate liquidity levels based on the current ratio, there are signs of decreasing liquidity when considering the quick ratio and cash ratio. Management should closely monitor these ratios to ensure the company can effectively meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle for Organon & Co. has fluctuated significantly over the past five years. In 2019 and 2020, the company had a high cash conversion cycle of 199.67 days and 163.40 days, respectively, indicating that it took a considerable amount of time for the company to convert its investments in inventory and accounts receivable into cash.

However, there was a substantial improvement in 2021, with the cash conversion cycle decreasing to 8.46 days. This suggests that Organon & Co. effectively managed its working capital and streamlined its operations to accelerate the conversion of inventory and receivables into cash.

In 2022, the cash conversion cycle further improved to 66.68 days, indicating continued efficiency in working capital management. However, by the end of 2023, the cash conversion cycle increased to 101.78 days, which may indicate a potential slowdown in cash flow efficiency compared to the previous year.

Overall, the trend in the cash conversion cycle for Organon & Co. shows improvement from 2019 to 2021, but a slight regression in 2023. It is essential for the company to focus on optimizing its inventory and accounts receivable turnover to maintain a healthy cash conversion cycle and ensure efficient cash flow management.