Oracle Corporation (ORCL)

Oracle Corporation's liquidity ratios have shown a consistent decline over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has decreased from 3.03 in 2020 to 0.72 in 2024. This suggests that Oracle's current assets are not sufficient to cover its current liabilities, indicating a potential liquidity risk.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also declined over the years, from 2.83 in 2020 to 0.59 in 2024. This indicates that Oracle may struggle to meet its short-term obligations without relying on inventory.

The cash ratio, which specifically measures the company's ability to cover current liabilities with its most liquid assets (cash and cash equivalents), has followed the same downward trend, dropping from 2.50 in 2020 to 0.34 in 2024. This implies that Oracle has a limited ability to cover its current liabilities solely with its cash reserves.

Overall, the decreasing trend in Oracle Corporation's liquidity ratios raises concerns about its short-term financial health and ability to meet its obligations. It may indicate a need for the company to improve its working capital management practices and increase its cash reserves to enhance liquidity.

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See also:

Oracle Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Oracle Corporation has exhibited fluctuations over the past five years. In the most recent fiscal year ending May 31, 2024, the company reported a negative cash conversion cycle of -0.23 days, indicating that Oracle is efficient in managing its working capital and operating cash flow. This signifies that the company is able to quickly convert its investments in inventory into cash receipts from sales and then use that cash to pay suppliers.

However, in the preceding years, Oracle's cash conversion cycle was positive, ranging from 27.45 days to 40.98 days. This suggests that the company took longer to convert its investments in inventory into cash, which could potentially indicate inefficiencies in working capital management or slower collection of receivables.

Overall, the negative cash conversion cycle in 2024 suggests an improvement in Oracle's working capital efficiency compared to previous years. Monitoring this metric in conjunction with other financial ratios can provide a more comprehensive assessment of the company's liquidity and operational efficiency.