Agilysys Inc (AGYS)

Agilysys Inc's liquidity ratios provide insights into the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has fluctuated over the years. It generally stayed above 2, indicating a healthy level of liquidity. However, the ratio showed a slight decline from March 2024 to September 2024, dropping to 1.13 and 1.14 respectively, which may indicate potential liquidity challenges during that period.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similar to the current ratio, the quick ratio remained above 1.5 in most periods, indicating a strong ability to cover immediate liabilities with more liquid assets. Like the current ratio, the quick ratio decreased significantly from March 2024 to September 2024, hitting 0.95 and 0.99, possibly signaling a temporary liquidity strain.

The cash ratio, which is the most conservative liquidity measure, focusing only on cash and cash equivalents to cover current liabilities, generally demonstrated a healthy liquidity position over the years. It peaked at 2.04 in September 2021, indicating a strong ability to meet short-term obligations with readily available cash. However, similar to the current and quick ratios, the cash ratio dropped notably in the last two quarters of the data, hitting 0.57 and 0.53 in September and December 2024, suggesting a significant reduction in liquid assets.

Overall, while Agilysys Inc maintained a relatively strong liquidity position based on the current ratio, quick ratio, and cash ratio, there were periods where the ratios declined, signaling potential liquidity challenges in meeting short-term obligations. Management should continue to monitor and manage the company's liquidity position effectively to ensure financial stability and operational flexibility.

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Additional liquidity measure

Agilysys Inc's cash conversion cycle has experienced fluctuations over the periods analyzed. The cash conversion cycle, representing the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales, is a vital metric for assessing the company's operational efficiency.

From the data provided, we observe that Agilysys Inc's cash conversion cycle decreased steadily from 71.13 days as of June 30, 2020, to -60.76 days as of March 31, 2025. A negative cash conversion cycle indicates that the company is receiving cash from sales before needing to pay its suppliers, which can be advantageous for liquidity and cash flow management.

During this period, the company's cash conversion cycle fluctuated between positive and negative values, indicating varying efficiency in managing working capital. Notably, the cycle experienced significant improvements in efficiency, reaching its lowest point by March 31, 2025, where the company was able to convert inventory and other operating resources into cash before payment was due to suppliers.

While a negative cash conversion cycle can be a positive sign, it's essential to examine the underlying reasons for this trend, such as improvements in inventory management, collection of receivables, or renegotiation of payment terms with suppliers. Overall, Agilysys Inc's decreasing cash conversion cycle indicates enhanced operational effectiveness and potentially improved liquidity and working capital management over the analyzed period.