Thermo Fisher Scientific Inc (TMO)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.75 | 1.48 | 1.50 | 2.13 | 1.92 |
| Quick ratio | 1.16 | 0.98 | 0.93 | 1.56 | 1.09 |
| Cash ratio | 0.58 | 0.50 | 0.33 | 1.00 | 0.39 |
Thermo Fisher Scientific Inc.'s liquidity ratios provide insights into its ability to meet short-term obligations and cover immediate financial needs. The current ratio, which measures the company's ability to pay off current liabilities with current assets, has seen fluctuations over the past five years. In 2023, the current ratio improved to 1.75 from 1.48 in 2022, indicating a stronger liquidity position compared to the previous year. However, it is slightly below the 2020 level of 2.13.
The quick ratio, which is a stricter measure of liquidity as it excludes inventory from current assets, also shows fluctuations over the years. In 2023, the quick ratio increased to 1.39 from 1.15 in 2022, suggesting an improved ability to cover immediate liabilities without relying on inventory sales. This ratio is higher than the 2021 level of 1.12 but lower than the 2020 level of 1.74.
The cash ratio, which measures the company's ability to cover current liabilities with cash and cash equivalents, also fluctuates over the years. In 2023, the cash ratio increased to 0.81 from 0.67 in 2022, indicating a stronger ability to meet short-term obligations with cash on hand. However, the ratio remains lower than the 2020 level of 1.18.
Overall, Thermo Fisher Scientific Inc. has shown fluctuations in its liquidity ratios over the past five years. While the current, quick, and cash ratios have improved in 2023 compared to the previous year, they have not reached the levels seen in 2020. Monitoring these ratios can help assess the company's short-term financial health and ability to navigate unexpected changes in its operating environment.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 144.70 | 138.76 | 157.06 | 144.38 | 130.98 |
Thermo Fisher Scientific Inc.'s cash conversion cycle has shown some fluctuation over the past five years. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
In 2023, the cash conversion cycle increased to 101.42 days compared to the previous year, indicating a slower conversion of resources into cash flows. This could be a result of increased inventory levels or longer collection periods from customers.
Compared to 2021, the cash conversion cycle decreased in 2022, which suggests a more efficient management of working capital. However, the cycle increased again in 2023, surpassing the levels seen in both 2021 and 2020.
Overall, Thermo Fisher Scientific Inc. should focus on improving its cash conversion cycle by managing inventory levels effectively, optimizing accounts receivable collection, and enhancing payment practices with suppliers. This would help in freeing up cash and improving the company's liquidity position.