Solventum Corp. (SOLV)

Solventum Corp.'s liquidity ratios show varying trends over the past five quarters.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has generally been within an acceptable range. It increased from 1.65 in December 2023 to 1.81 in March 2024, indicating improved short-term liquidity compared to the previous quarter. The ratio was particularly low in the first quarter of 2023 at 0.04, suggesting potential liquidity issues at that time.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Solventum Corp.'s quick ratio has also shown improvement, rising from 0.34 in December 2023 to 0.54 in March 2024. This indicates a better ability to meet short-term obligations with more liquid assets. Similar to the current ratio, the quick ratio was very low in the first quarter of 2023 at 0.04.

The cash ratio, which focuses solely on cash and cash equivalents to cover current liabilities, follows a similar pattern to the quick ratio. It increased from 0.34 in December 2023 to 0.54 in March 2024, reflecting an enhanced ability to meet short-term obligations with cash on hand.

Overall, Solventum Corp. has been working on improving its liquidity position over the quarters, as evidenced by the increasing trend in its current, quick, and cash ratios. However, the company experienced a significant liquidity challenge in the first quarter of 2023 based on the extremely low current, quick, and cash ratios at that time. Continued monitoring and improvement in liquidity management will be crucial for the company's financial health and operational stability.

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Additional liquidity measure

The cash conversion cycle of Solventum Corp. has shown some fluctuations over the past five quarters. As of March 31, 2024, the company's cash conversion cycle stands at 91.24 days, reflecting the number of days it takes for Solventum Corp. to convert its investments in inventory and other resources into cash flows.

Looking at the data trend, we can observe some variability in the cash conversion cycle over the quarters, with the cycle ranging from 87.09 days to 92.41 days. This indicates that Solventum Corp. has experienced changes in its efficiency in managing its working capital components.

It is essential for the company to monitor and manage its cash conversion cycle effectively to ensure optimal utilization of resources and maintain liquidity. Any prolonged lengthening of this cycle could potentially signal issues with inventory management, accounts receivable collection, or payment periods, impacting the company's overall performance and financial health.