Western Digital Corporation (WDC)

The liquidity ratios of Western Digital Corporation have shown a declining trend over the past five years, indicating a potential deterioration in the company's short-term solvency and ability to meet its current obligations.

The current ratio, which compares current assets to current liabilities, has decreased from 2.05 in 2020 to 1.32 in 2024. This suggests that the company may have fewer liquid assets available to cover its short-term liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also remained relatively low, ranging from 0.67 in 2023 and 2024. This indicates that Western Digital may struggle to meet its immediate obligations without relying on inventory sales.

The cash ratio, which focuses solely on cash and cash equivalents compared to current liabilities, has similarly declined, falling from 1.12 in 2020 to 0.31 in 2024. This suggests a decreasing ability to cover short-term liabilities with readily available cash.

Overall, the downward trend in these liquidity ratios for Western Digital Corporation raises concerns about its financial flexibility and ability to manage short-term financial commitments effectively. Investors and stakeholders may need to monitor the company's liquidity position closely to assess its financial health and sustainability in the near term.

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See also:

Western Digital Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Western Digital Corporation has shown an increasing trend over the past five years, reflecting a slower conversion of inventory and receivables into cash.

In Jun 2020, the cash conversion cycle was 79.29 days, which increased to 91.06 days by Jun 2021, indicating a longer timeframe for the company to convert its investments into cash.

The trend continued in the following years with slightly higher days to convert into cash in Jun 2022 (97.62 days) and Jun 2023 (158.93 days). However, there was a significant jump in the cash conversion cycle in Jun 2024, reaching 166.11 days.

A longer cash conversion cycle can indicate inefficiencies in managing inventory, collecting receivables, and paying suppliers, which may lead to increased working capital requirements and potential liquidity challenges.

Western Digital Corporation may need to focus on improving its inventory management, collection practices, and optimizing its operating cycle to enhance cash flow efficiency and overall financial performance.