Warner Music Group (WMG)

Warner Music Group's liquidity ratios reflect the company's ability to meet its short-term financial obligations. The current ratio, which measures the company's ability to pay off its current liabilities with current assets, has shown some improvement over the past five years. However, the ratio has remained below 1, indicating that the company may have difficulties meeting its short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Warner Music Group's quick ratio has also shown improvement over the years but remains below 1, suggesting that the company may struggle to cover its short-term liabilities without relying on inventory.

The cash ratio, which indicates the company's ability to cover its current liabilities with its cash and cash equivalents, has generally improved over the years. However, the ratio remains relatively low, indicating that Warner Music Group may have limited cash resources available to cover its short-term obligations.

Overall, Warner Music Group's liquidity ratios show some improvement, but the company still faces challenges in meeting its short-term financial obligations without relying on inventory or other assets. Investors and creditors may monitor these ratios closely to assess the company's ability to manage its liquidity risk.

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Additional liquidity measure

Warner Music Group's cash conversion cycle has shown some fluctuations over the past five years. In the most recent fiscal year ending on September 30, 2023, the cash conversion cycle increased to 57.53 days from 47.77 days in the previous year. This suggests that the company took longer to convert its investments in inventory and accounts receivable into cash during the period.

Comparing to the previous years, the cash conversion cycle was higher in 2020 with 48.66 days and in 2019 with 46.73 days. However, it was lower in 2022 with 47.77 days and in 2021 with 42.25 days, indicating more efficient management of working capital in those years.

The increasing trend in the cash conversion cycle in 2023 might indicate potential issues such as slower inventory turnover or longer collection periods for accounts receivable. This could lead to reduced liquidity and working capital efficiency for Warner Music Group. It is important for the company to closely monitor and manage its cash conversion cycle to ensure optimal utilization of its resources and maintain healthy cash flow levels.