Altair Engineering Inc (ALTR)

Altair Engineering Inc's liquidity ratios provide insight into its ability to meet short-term obligations and financial obligations using its current assets.

The current ratio, which measures the company's ability to pay off its current liabilities with its current assets, has shown some fluctuation over the past five years. The ratio has generally been above 1, indicating a strong ability to cover short-term liabilities, but it decreased from 2.18 in 2019 to 1.24 in 2021 before showing some improvement in the most recent year.

The quick ratio, also known as the acid-test ratio, is considered a more stringent measure of liquidity as it excludes inventory from current assets. Altair Engineering's quick ratio has also displayed fluctuations over the years. While still above 1, the ratio decreased significantly from 2.19 in 2019 to 1.18 in 2021 before recovering slightly in the most recent year.

The cash ratio, the most conservative measure of liquidity, reflects the company's ability to cover its current liabilities solely with cash and cash equivalents. Altair Engineering's cash ratio has also varied over time, with some fluctuations observed. Although the ratio has generally been above 1, it decreased from 1.46 in 2019 to 0.87 in 2021 before showing improvement in the latest year.

Overall, Altair Engineering Inc's liquidity ratios indicate that the company has maintained a relatively strong position in meeting its short-term obligations, with current and quick ratios consistently above 1. However, the fluctuations in these ratios over the years suggest that further monitoring and management of liquidity may be necessary to ensure continued financial stability.

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Additional liquidity measure

Altair Engineering Inc's cash conversion cycle has been showing an increasing trend over the past five years, indicating potential inefficiencies in managing its working capital. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

In 2023, Altair's cash conversion cycle increased to 116.08 days from 108.16 days in 2022. This suggests that the company took longer to convert its investment in inventory into revenue-generating cash flows. Additionally, the cash conversion cycle has been steadily increasing since 2019, reaching its peak in 2023.

Altair Engineering Inc may need to evaluate its inventory management, accounts receivable collection, and accounts payable processes to optimize its cash conversion cycle and improve liquidity. A longer cash conversion cycle may indicate potential cash flow challenges or inefficiencies in operational processes that could impact the company's financial performance and overall working capital management.