Thermo Fisher Scientific Inc (TMO)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.66 | 1.75 | 1.48 | 1.50 | 2.13 |
| Quick ratio | 0.42 | 0.44 | 0.50 | 0.33 | 1.00 |
| Cash ratio | 0.42 | 0.44 | 0.50 | 0.33 | 1.00 |
Thermo Fisher Scientific Inc's liquidity ratios show a mixed performance over the five-year period from 2020 to 2024.
1. Current Ratio: The current ratio measures the company's ability to meet its short-term financial obligations. Thermo Fisher's current ratio decreased from 2.13 in 2020 to 1.50 in 2021, indicating a decline in its short-term liquidity position. However, the ratio slightly improved in the following years, reaching 1.66 in 2024. While the current ratio remained above 1 in all years, suggesting the company had sufficient current assets to cover its current liabilities, the decreasing trend from 2020 to 2021 and the subsequent improvement highlight fluctuations in its liquidity.
2. Quick Ratio: The quick ratio provides a more stringent measure of liquidity by excluding inventory from current assets. Thermo Fisher's quick ratio dropped significantly from 1.00 in 2020 to 0.33 in 2021, indicating a weakened ability to meet short-term obligations without relying on inventory. The ratio slightly increased in the following years but remained below 1, signaling a continued reliance on inventory to meet immediate financial needs.
3. Cash Ratio: The cash ratio focuses solely on the company's ability to cover its current liabilities with its cash and cash equivalents. Thermo Fisher's cash ratio mirrored the trend of the quick ratio, declining from 1.00 in 2020 to 0.33 in 2021 and then gradually improving to 0.42 in 2024. The lower ratios in 2021 implied a reduced ability to pay off short-term liabilities with cash on hand, although the subsequent recovery indicated a partial strengthening in liquidity position.
In conclusion, Thermo Fisher Scientific Inc's liquidity ratios suggest fluctuations in its short-term financial health over the analyzed period, with a significant decline in 2021 followed by some recovery in the subsequent years. The company may need to closely monitor its liquidity position and manage cash flow to ensure its ability to meet short-term obligations efficiently.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 73.35 | 73.42 | 80.91 | 97.15 | 93.59 |
Thermo Fisher Scientific Inc's cash conversion cycle has shown a fluctuating trend over the past five years.
In December 31, 2020, the cash conversion cycle was 93.59 days, indicating that it took the company nearly 94 days to convert its investments in inventory and other resources into cash from sales.
By December 31, 2021, the cycle had increased to 97.15 days, suggesting a slightly longer timeframe for the company to complete its operating cycle.
However, in December 31, 2022, there was a notable improvement as the cash conversion cycle decreased to 80.91 days. This could indicate more efficient management of inventory and quicker conversion of goods into cash.
The trend continued positively in December 31, 2023, with a further decrease to 73.42 days, reflecting enhanced operational efficiency and potentially tighter working capital management.
By December 31, 2024, the cash conversion cycle remained relatively stable at 73.35 days, indicating continued effectiveness in managing cash flow and operational cycle efficiency.
Overall, the decreasing trend in the cash conversion cycle from 2020 to 2024 reflects potential improvements in Thermo Fisher Scientific Inc's working capital management and operational efficiency.