Analog Devices Inc (ADI)

The liquidity ratios of Analog Devices Inc. reflect its ability to meet short-term obligations and maintain financial stability. The current ratio, which measures the company's ability to pay short-term liabilities with its current assets, decreased from 2.02 in 2022 to 1.37 in 2023, indicating a decline in short-term liquidity. This suggests a potential reduction in the company's ability to cover its immediate financial obligations using its current assets.

Similarly, the quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, decreased from 1.45 in 2022 to 0.86 in 2023. This significant decrease may raise concerns about the company's ability to meet its short-term liabilities using its most liquid assets.

Furthermore, the cash ratio, which indicates the proportion of current liabilities that can be covered by cash and cash equivalents, also declined from 0.71 in 2022 to 0.40 in 2023, suggesting a reduced ability to cover short-term obligations solely with cash on hand.

Overall, the decreasing trend in these liquidity ratios raises potential concerns about Analog Devices Inc.'s short-term financial health and ability to meet its near-term financial obligations. It is important for stakeholders to closely monitor these ratios and the company's cash management strategies to ensure continued financial stability.

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See also:

Analog Devices Inc Liquidity Ratios

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Additional liquidity measure

Analog Devices Inc.'s cash conversion cycle has fluctuated over the past five years, indicating variations in its efficiency in managing cash flows. The company's cash conversion cycle was highest in 2021 at 171.71 days, reflecting a longer period between the company's cash outflows for inventory and cash inflows from the sale of goods. This suggests potential inefficiencies in inventory management or slower collection of receivables during that year. In contrast, the cash conversion cycle decreased to 109.69 days in 2019, signaling improved efficiency in converting inventory and receivables into cash.

The trend shows a general improvement in 2020, with a lower cash conversion cycle of 120.75 days, followed by a further reduction in 2022 to 121.30 days, demonstrating enhanced working capital management. However, the cycle then increased in 2023 to 138.31 days, suggesting a lengthening in the time it takes for the company to convert its investments in raw materials and resources into cash received from sales. This fluctuation may indicate a need for periodic assessment and potential refinement of operational and credit policies to maintain and improve cash conversion efficiency.