Waste Management Inc (WM)

The liquidity ratios of Waste Management, Inc. indicate the company's ability to meet its short-term financial obligations effectively. Looking at the current ratio, it has been fluctuating over the past five years, ranging from 0.75 to 1.97. The current ratio is calculated as the ratio of current assets to current liabilities. A current ratio below 1 suggests that the company may have difficulty meeting its short-term obligations with its current assets alone. Waste Management's current ratio has been below 1 for the past three years, indicating potential liquidity concerns.

The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, shows a similar trend. Waste Management's quick ratio has been below 1 for the past five years, ranging from 0.72 to 1.94. This indicates that even after excluding inventory, the company may struggle to meet its short-term obligations with its quick assets.

The cash ratio, the most conservative liquidity ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, also shows a concerning trend for Waste Management. The cash ratio has been below 1 for the past five years, ranging from 0.10 to 1.20. This indicates that the company may not have enough cash on hand to cover its short-term obligations, which could potentially lead to liquidity challenges.

Overall, Waste Management, Inc. has exhibited declining liquidity ratios over the past five years, indicating potential liquidity risks that investors and stakeholders should closely monitor. The company may need to focus on improving its liquidity position to ensure it can meets its short-term financial obligations efficiently.

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See also:

Waste Management Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Waste Management, Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 6.81 days, reflecting an increase compared to the previous year. This suggests that Waste Management took longer to convert its investments in inventory and receivables into cash during the year.

In 2022, the company had a cash conversion cycle of 3.43 days, indicating a relatively efficient cycle where Waste Management was able to quickly convert its resources into cash. However, in 2021, the cycle increased to 11.09 days, signaling a slowdown in the cash conversion process compared to the previous year.

The most significant increase in the cash conversion cycle occurred in 2020, where it reached 23.98 days, representing a substantial delay in converting assets into cash. This may have been influenced by a variety of factors such as changes in inventory management or collection processes.

In 2019, Waste Management had a cash conversion cycle of 17.91 days, which was higher than the previous year but lower than in 2020. Overall, the fluctuation in the cash conversion cycle over the five-year period indicates varying efficiency levels in converting the company's operating assets into cash. Further analysis of the underlying factors impacting the cycle in each year could provide insights into the company's working capital management and operational performance.