Zoetis Inc (ZTS)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 3.36 | 2.37 | 3.86 | 3.05 | 2.63 |
| Quick ratio | 1.80 | 1.54 | 2.60 | 2.15 | 1.69 |
| Cash ratio | 1.08 | 1.13 | 1.94 | 1.66 | 1.07 |
Zoetis Inc's liquidity ratios have exhibited varying trends over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown improvement from 2019 to 2023. The company's current ratio has generally been above 2, indicating a healthy liquidity position, with a significant increase to 3.86 in 2021. This implies that Zoetis has ample current assets to meet its short-term obligations.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Zoetis' quick ratio has also shown an improving trend over the years, staying above 1.5, which is considered a good benchmark for most industries. In particular, the quick ratio increased to 2.00 in 2023, indicating the company's ability to cover its short-term obligations without relying on inventory.
The cash ratio, which is the most conservative measure of liquidity as it focuses solely on cash and cash equivalents, reveals Zoetis' ability to cover its current liabilities with its cash holdings. The company's cash ratio has fluctuated but generally remained above 1, with a notable increase to 2.16 in 2021. This suggests that Zoetis possesses sufficient cash reserves to meet its short-term obligations.
Overall, Zoetis Inc's liquidity ratios indicate a strong and improving liquidity position over the years, with ample current assets, a healthy quick ratio, and a solid cash position. These ratios suggest that the company is well-equipped to meet its short-term financial obligations and navigate any potential liquidity challenges effectively.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 215.67 | 208.27 | 173.69 | 162.72 | 167.96 |
The cash conversion cycle for Zoetis Inc has shown a fluctuating trend over the past five years. In 2023, the company's cash conversion cycle increased to 362.56 days from 343.43 days in 2022. This suggests that the company took longer to convert its investments in inventory and accounts receivable into cash during the year.
Comparing to 2021, where the cash conversion cycle was 288.86 days, it indicates a worsening performance in managing its working capital in 2023. However, there has been an improvement from 2020 when the cash conversion cycle was 263.18 days.
Even though the cash conversion cycle increased in 2023, the company should focus on efficiently managing its inventory levels, collecting accounts receivable promptly, and optimizing its payment terms to suppliers to shorten the cash conversion cycle in the future.