US Foods Holding Corp (USFD)

The liquidity ratios of US Foods Holding Corp provide insights into the company's ability to meet its short-term obligations and cover immediate financial needs.

The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has shown a declining trend over the past five years, from 1.38 in 2019 to 1.30 in 2023. While a current ratio above 1.0 generally indicates good short-term financial health, the decreasing trend suggests a potential weakening of the company's ability to cover its current liabilities with its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similar to the current ratio, the quick ratio has remained relatively stable at around 0.68 over the past three years. A quick ratio below 1.0 indicates that the company may have difficulty meeting its short-term obligations without relying on selling inventory.

The cash ratio, the most conservative liquidity ratio, focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents. The cash ratio has fluctuated significantly over the past five years, ranging from 0.04 in 2019 to 0.09 in 2023. A higher cash ratio indicates a stronger ability to cover short-term liabilities purely with cash on hand.

Overall, the liquidity ratios of US Foods Holding Corp suggest that while the company maintains a reasonable ability to cover its short-term obligations, there may be some concerns regarding the downward trend in the current ratio and the relatively low levels of quick and cash ratios. Management should continue to monitor these ratios closely to ensure the company's liquidity position remains healthy and sustainable.

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Additional liquidity measure

The cash conversion cycle (CCC) of US Foods Holding Corp has been showing a decreasing trend over the past five years. The company's CCC decreased from 20.22 days in 2019 to 14.48 days in 2023. This indicates that the firm has been improving its efficiency in managing its cash flows and working capital.

A lower CCC suggests that the company is more efficient in converting its inventory and accounts receivable into cash, ultimately leading to a shorter cash cycle. US Foods Holding Corp has been able to reduce the time it takes to sell inventory, collect receivables, and pay its suppliers, which can be a positive sign for the company's liquidity and financial health.

Overall, the decreasing trend in the cash conversion cycle of US Foods Holding Corp over the past five years reflects improved working capital management and efficiency in cash flow operations.