Allegiant Travel Company (ALGT)

Allegiant Travel Company's liquidity ratios demonstrate fluctuations over the years. The current ratio, which measures the company's ability to cover short-term obligations with its current assets, increased from 1.37 in 2020 to 2.02 in 2021 before declining to 0.78 in 2024. This indicates a strong liquidity position in 2021 but a potential liquidity strain in 2024.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, followed a similar trend. It rose from 1.27 in 2020 to 1.88 in 2021 but then dropped to 0.68 in 2024, signaling a decreasing ability to meet short-term obligations without relying on inventory.

Furthermore, the cash ratio, representing the company's ability to cover current liabilities with cash and cash equivalents, exhibited fluctuation as well. It increased from 0.99 in 2020 to 1.78 in 2021, suggesting an improved liquidity position, but subsequently declined to 0.61 in 2024, indicating a reduced capacity to settle short-term obligations with cash on hand alone.

Overall, Allegiant Travel Company's liquidity ratios suggest varying degrees of liquidity strength over the years, with potential liquidity challenges arising in 2024 based on the downward trend observed in the current, quick, and cash ratios.

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Additional liquidity measure

The cash conversion cycle of Allegiant Travel Company has shown a significant improvement over the past five years, indicating more efficient management of cash flow and working capital.

As of December 31, 2020, the cash conversion cycle stood at 59.87 days, reflecting the time it took for the company to convert its investments in inventory and receivables into cash. However, by December 31, 2021, the cycle reduced dramatically to just 0.29 days, indicating a swift conversion of assets into cash.

This trend continued in subsequent years, with the cash conversion cycle further decreasing to -7.15 days by December 31, 2022, -8.58 days by December 31, 2023, and -1.46 days by December 31, 2024. Negative values in the cash conversion cycle suggest that Allegiant Travel Company is able to convert its investments into cash at a faster rate than the time it takes to pay off its obligations, leading to a more efficient use of resources and improved liquidity.

Overall, the decreasing trend in the cash conversion cycle over the years reflects the company's effectiveness in managing its working capital and generating cash flow, which may contribute to its financial stability and growth prospects.