Western Digital Corporation (WDC)

The liquidity ratios of Western Digital Corporation over the analyzed period reveal a declining trend in short-term liquidity.

Current Ratio: The current ratio, measuring the company's ability to cover its current liabilities with current assets, initially remained stable around approximately 2.00 from September 2020 through March 2022. In 2021, there was a slight increase reaching 2.09, indicating a comfortable liquidity position. However, from September 2022 onwards, the ratio experienced a notable decline, dropping sharply to 1.31 by September 2023. This downward trend continued into 2024, with the ratio declining further to 1.08 in June 2025. Despite this decrease, the current ratio remains above 1. suggesting that the company, generally, can meet its short-term obligations, albeit with a tighter margin compared to earlier periods.

Quick Ratio: The quick ratio, which excludes less liquid inventories, shows a similar declining pattern. It started at approximately 1.54 in September 2020 and remained relatively stable around 1.41 to 1.57 during 2020 and early 2021. Following this period, the quick ratio experienced significant fluctuations, declining consistently to 0.60 by September 2023. The ratio briefly improved slightly towards the end of 2023 and into early 2024 but remained below 1 through most of 2023 and 2024, indicating reduced capacity for immediate liquidity without relying on inventory sales.

Cash Ratio: The company's cash ratio, representing the most conservative measure of liquidity, also declined from 1.07 in September 2020 to a low of 0.28 in September 2024. There was a slight recovery in 2025, with the ratio increasing to 0.67 in March 2025, reflecting a minimal but positive shift towards higher immediate liquidity. Throughout the period, the cash ratio has generally remained below 1, indicating that the company's cash holdings alone are insufficient to cover its current liabilities without other liquid assets.

Overall, the liquidity position of Western Digital Corporation has deteriorated over this period. While the current ratio has declined from comfortable levels above 2 to around 1.08, and the more conservative liquidity ratios have also declined significantly, the company still maintains ratios above 1 in many cases, suggesting it retains some capacity to meet short-term obligations. The sustained decline in these ratios indicates tightening liquidity conditions, which warrants ongoing monitoring of the company's working capital management and cash flow strategies moving forward.

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See also:

Western Digital Corporation Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The data illustrates the evolution of Western Digital Corporation’s cash conversion cycle (CCC) over the period from September 2020 to June 2025. Initially, the CCC exhibited a relatively moderate level, recording 74.88 days as of September 2020. Throughout 2020 and into 2021, the CCC experienced a gradual upward trend, reaching a peak of approximately 87 days by December 2021. During this period, the increases suggest a lengthening of the time required to convert investments in inventory and receivables into cash, potentially indicating operational or market challenges affecting inventory turnover or collection periods.

Entering 2022, the CCC continued its upward trajectory, surpassing 94 days in June and reaching a significant high of 113.64 days by December 2022. The upward trend persisted into early 2023, with the CCC exceeding 121 days, indicating a substantial elongation of the cash cycle. This escalation could reflect delayed receivables collection, prolonged inventory holding periods, or both.

In the subsequent period through September 2023, the CCC showed signs of slight reduction, decreasing to approximately 115.86 days, yet remained substantially elevated relative to the initial levels. The annual data reveal a trend of persistent expansion, culminating at 141.83 days as of December 2024, representing a near doubling from the initial cycle observed in 2020.

Interestingly, in the first quarter of 2025, there is a notable sharp decline in the CCC to 38.10 days, followed by an increase to 41.95 days in the second quarter. This rapid decrease suggests significant operational improvements or strategic changes impacting the firm's liquidity management, leading to shorter cash conversion periods.

Overall, the period from September 2020 to late 2024 depicts a prolonged expansion of Western Digital's cash conversion cycle, indicative of increasing operational or market challenges, or shifts in working capital management. The marked reduction observed in early 2025 implies a restructuring or process enhancement that substantially improves liquidity flow metrics.