Allegro Microsystems Inc (ALGM)

Allegro Microsystems Inc has shown consistency and strength in its liquidity position over the past four years based on its liquidity ratios. The current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, has been consistently above 1, signaling a strong position.

The company's current ratio has shown an improving trend from 3.69 in 2021 to 4.85 in 2024. This suggests that Allegro Microsystems has increased its ability to meet its short-term obligations using current assets.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, has also been healthy, ranging from 2.72 in 2021 to 2.98 in 2023 and further to 2.80 in 2024. This indicates that the company has a strong ability to meet its short-term liabilities using its most liquid assets.

The cash ratio, representing the company's ability to cover its current liabilities with cash and cash equivalents, has been consistently above 1, ensuring that Allegro Microsystems Inc has sufficient cash reserves to meet its short-term obligations without relying on other current assets.

Overall, Allegro Microsystems Inc's liquidity ratios depict a robust liquidity position, with improving trends in the current and quick ratios, indicating the company's ability to meet its short-term obligations efficiently.

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Additional liquidity measure

The cash conversion cycle of Allegro Microsystems Inc has shown some fluctuations over the past four years. In the most recent fiscal year ending on March 31, 2024, the company's cash conversion cycle was 109.85 days, indicating that on average, it takes Allegro 109.85 days to convert its investments in inventory and receivables into cash flows from sales.

Comparing this to the previous three years, we observe that the cycle was at its highest in March 2023 at 116.50 days, suggesting a longer period required to convert investments to cash during that period. In contrast, the cycle was at its lowest in March 2022 at 94.28 days, implying a more efficient management of working capital during that fiscal year.

The cash conversion cycle for March 31, 2021, was 98.77 days, slightly lower than the most recent year, but still higher compared to the efficiency seen in March 2022. Overall, while there have been fluctuations, indicating changes in working capital management efficiency, Allegro Microsystems Inc should continue monitoring and improving its cash conversion cycle to optimize its liquidity and operational performance.