Teradata Corp (TDC)

Teradata Corp's liquidity ratios have shown a declining trend over the years.

1. Current Ratio:
- The current ratio, which measures short-term liquidity by dividing current assets by current liabilities, decreased from 1.10 in 2020 to 0.81 in 2024.
- A current ratio of less than 1 indicates that the company may have difficulty meeting its short-term obligations.

2. Quick Ratio:
- The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, remained relatively stable around 0.55 to 0.57 from 2020 to 2024.
- A quick ratio below 1 suggests that the company may have difficulties paying off its current liabilities without relying on inventory sales.

3. Cash Ratio:
- The cash ratio, which is the most conservative liquidity measure focusing solely on cash and cash equivalents to cover short-term liabilities, also showed a slight decline from 0.56 in 2020 to 0.45 in 2024.
- A decreasing cash ratio may indicate potential cash flow challenges in meeting immediate obligations without relying on other current assets.

Overall, Teradata Corp's liquidity ratios suggest a decreasing ability to cover short-term obligations with current assets. Management should closely monitor and improve the company's liquidity position to ensure financial stability and meet its immediate financial obligations.

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Additional liquidity measure

Teradata Corp's cash conversion cycle, which represents the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales, exhibited fluctuations over the years.

On December 31, 2020, the cash conversion cycle stood at 12.96 days, indicating that Teradata took approximately 13 days to convert its investments into cash. This cycle remained relatively stable in the following year, with a slight increase to 12.98 days on December 31, 2021.

However, significant changes occurred in the subsequent years. By December 31, 2022, the cash conversion cycle notably decreased to 4.09 days, demonstrating an improvement in the efficiency of Teradata's cash management. This trend continued in 2023, with the cycle further reducing to 6.62 days.

By December 31, 2024, the cash conversion cycle slightly increased to 9.49 days compared to the previous year but remained lower than the levels observed in 2020 and 2021.

Overall, the company's cash conversion cycle experienced fluctuations over the years, with notable improvements in efficiency evident in 2022 and 2023. Monitoring the cash conversion cycle is crucial for assessing a company's operational efficiency and liquidity management.