Tenet Healthcare Corporation (THC)

Tenet Healthcare Corp.'s liquidity ratios provide insights into the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown a general increasing trend over the past five years, from 1.21 in 2019 to 1.51 in 2023. This indicates that the company has improved its liquidity position over time, with the current ratio reaching a healthy level in 2023.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. The trend for Tenet Healthcare Corp.'s quick ratio has been relatively stable, ranging from 1.04 in 2019 to 1.26 in 2023. This suggests that the company has a reasonable ability to cover its short-term obligations with its most liquid assets.

The cash ratio, which is the most conservative liquidity ratio, has also varied over the past five years. The ratio has fluctuated between 0.39 in 2019 and 0.81 in 2020 before decreasing to 0.64 in 2023. This indicates that while the company has a sufficient level of cash to cover its current liabilities, there may have been some fluctuations in its cash position.

Overall, Tenet Healthcare Corp.'s liquidity ratios demonstrate a generally positive liquidity position, with improvements in the current ratio and reasonable quick ratio levels. However, the fluctuation in the cash ratio warrants further investigation into the company's cash management practices to ensure continued liquidity stability.

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Additional liquidity measure

The cash conversion cycle of Tenet Healthcare Corp. has shown a slight decrease in efficiency over the past five years. As of December 31, 2023, the company's cash conversion cycle stood at 51.72 days, which is a slight improvement compared to the previous year. This indicates that on average, it takes Tenet Healthcare Corp. approximately 51.72 days to convert its investments in inventory and other resources into cash receipts from customers.

The trend over the past five years shows some fluctuations but generally remains within a relatively narrow range between 51.38 days and 55.46 days. This suggests that Tenet Healthcare Corp. has been able to manage its working capital effectively to sustain its operations. However, there may be room for further improvements in streamlining its cash flow processes to shorten the cash conversion cycle and enhance liquidity management.

Overall, Tenet Healthcare Corp. should continue monitoring and optimizing its cash conversion cycle to ensure efficient utilization of resources and timely cash inflows to support its financial stability and growth in the healthcare industry.