Align Technology Inc (ALGN)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.18 | 1.26 | 1.30 | 1.40 | 1.68 |
| Quick ratio | 0.98 | 1.04 | 1.08 | 1.23 | 1.84 |
| Cash ratio | 0.47 | 0.52 | 0.61 | 0.72 | 1.22 |
Based on the data provided for Align Technology, Inc.'s liquidity ratios over the past five years, we observe the following trends:
1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Align Technology's current ratio has been gradually declining from 1.68 in 2019 to 1.18 in 2023. This suggests that the company's ability to meet its short-term obligations with its current assets has weakened over the years. However, a current ratio above 1 indicates that the company can cover its short-term liabilities.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Align Technology's quick ratio has also shown a decreasing trend from 1.57 in 2019 to 1.04 in 2023. This implies that the company's ability to meet its short-term obligations without relying on inventory has diminished. A quick ratio above 1 indicates that the company can cover its short-term liabilities using its most liquid assets.
3. Cash Ratio:
The cash ratio is the most stringent liquidity ratio as it only considers cash and cash equivalents to cover current liabilities. Align Technology's cash ratio has displayed a consistent decline from 0.95 in 2019 to 0.60 in 2023. This indicates a decreasing ability to cover short-term obligations solely with cash and cash equivalents. A cash ratio above 1 would mean that the company holds enough cash to pay off all current liabilities.
In summary, Align Technology, Inc.'s liquidity ratios have demonstrated a weakening liquidity position over the years, with the current ratio, quick ratio, and cash ratio declining consistently. These trends suggest a potential need for the company to manage its current assets and liabilities more efficiently in order to improve its liquidity position in the future.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 157.02 | 167.67 | 106.66 | 96.42 | 104.64 |
The cash conversion cycle of Align Technology, Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 143.43 days, which improved compared to the previous year but was higher than the levels seen in 2021. This indicates that Align Technology, Inc. took approximately 143.43 days to convert its investments in inventory and accounts receivable into cash during 2023.
Although the cash conversion cycle increased in 2022, it decreased in 2023, showing some improvement in the efficiency of the company's cash management compared to the prior year. The trend in 2023 suggests that the company was slightly more efficient in managing its liquidity and working capital compared to 2022.
However, when compared to 2021, the cash conversion cycle in 2023 was higher, indicating a potential delay in converting investments into cash. It is essential for the company to continue monitoring and managing its inventory levels, accounts receivable, and accounts payable effectively to optimize its cash conversion cycle and maintain healthy liquidity levels.