Sylvamo Corp (SLVM)

Sylvamo Corp's liquidity ratios indicate the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover its current liabilities with its current assets, decreased from 2.28 in 2020 to 1.46 in 2021 but improved to 1.71 in 2022. It remained relatively stable around 1.72 in 2023 and 1.56 in 2024. A current ratio above 1 suggests that the company has sufficient current assets to cover its current liabilities, with a higher ratio indicating stronger short-term liquidity.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Sylvamo Corp's quick ratio increased from a low of 0.19 in 2020 to 0.99 in 2022, indicating a significant improvement in short-term liquidity. However, it dropped to 0.32 in 2023 and further to 0.30 in 2024, which may raise concerns about the company's ability to meet its immediate obligations without relying on inventory.

The cash ratio, which is the most conservative measure of liquidity as it considers only cash and cash equivalents, followed a similar trend to the quick ratio. It increased from 0.19 in 2020 to 0.99 in 2022 before declining to 0.32 in 2023 and 0.30 in 2024. This suggests that while Sylvamo Corp had a strong position in cash and cash equivalents in 2022, it faced challenges in maintaining the same level of liquidity in the subsequent years.

Overall, Sylvamo Corp's liquidity ratios show fluctuations in its ability to meet short-term obligations over the years, with improvements in some periods but potential challenges in others. Management should closely monitor these ratios to ensure the company maintains a healthy level of liquidity to withstand any unforeseen financial stress.

---

Additional liquidity measure

Based on the data provided, Sylvamo Corp's cash conversion cycle has shown a generally positive trend over the past five years, decreasing from 59.41 days as of December 31, 2020, to 46.51 days as of December 31, 2024.

The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower cash conversion cycle indicates that the company is more efficient in managing its working capital and converting its resources into cash.

Sylvamo Corp's decreasing trend in the cash conversion cycle suggests that the company has been improving its efficiency in managing its inventory, accounts receivable, and accounts payable over the years. This could be attributed to better inventory management, streamlined sales processes, and effective credit policies.

Overall, a decreasing cash conversion cycle is a positive indicator for the company as it implies better liquidity, improved working capital management, and potentially higher profitability. Sylvamo Corp's performance in this area reflects positively on its operational efficiency and financial health.