Solventum Corp. (SOLV)

Solventum Corp.'s liquidity ratios show fluctuations over the analyzed periods. The current ratio indicates the company's ability to cover its short-term obligations with its current assets. From December 31, 2022, to March 31, 2023, there was a significant decline in the current ratio from 1.70 to 0.04, suggesting potential liquidity issues. However, the ratio improved gradually in subsequent periods, reaching 1.20 by December 31, 2024.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, followed a similar trend. It was very low at 0.05 on December 31, 2022, indicating a lack of immediate liquidity, but improved over time to reach 0.28 by December 31, 2024.

The cash ratio, also known as the most conservative measure of liquidity, was consistently low across all periods, ranging from 0.04 to 0.54. This indicates that Solventum Corp. has a relatively small proportion of cash and cash equivalents compared to its current liabilities.

Overall, while Solventum Corp. showed improvements in its liquidity ratios over the analyzed period, particularly in current and quick ratios, the consistently low cash ratio suggests that the company may need to enhance its cash reserves to address short-term obligations effectively.

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Additional liquidity measure

Solventum Corp.'s cash conversion cycle has shown some variability over the periods analyzed. 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 shorter cash conversion cycle typically indicates that a company is efficient in managing its working capital.

From the provided data:

- The cash conversion cycle was relatively stable around the range of 87 to 92 days from December 2022 to March 2023.
- There was a slight improvement in efficiency as the cycle decreased to 87.10 days by September 2023.
- The trend continued with further reductions in the cycle to 87.09 days by December 2023 and 89.46 days by June 2024.
- However, there was a subsequent increase in the cash conversion cycle to 96.26 days by December 2024, indicating potential challenges in working capital management.

Overall, Solventum Corp.'s cash conversion cycle demonstrated fluctuations during the periods analyzed. While the company initially showed improvements in efficiency, the increase in the cycle towards the end of the period suggests a need for further analysis and possible adjustments in working capital management strategies to optimize cash flow conversion.