Applied Materials Inc (AMAT)

Applied Materials Inc's liquidity ratios have shown some fluctuations over the past five years.

The current ratio, which measures the company's ability to pay off its short-term liabilities with its current assets, decreased from 3.00 in 2020 to 2.51 in 2024. This indicates that in 2024, the company had $2.51 in current assets for every $1 in current liabilities, down from $3.00 in 2020. Although the ratio has declined over the years, it remains above 2, indicating a healthy liquidity position.

The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, also experienced a slight decrease from 1.99 in 2020 to 1.75 in 2024. This implies that the company had $1.75 in highly liquid assets to cover each dollar of current liabilities in 2024. Like the current ratio, the quick ratio remains above 1, indicating that Applied Materials Inc can meet its short-term obligations comfortably.

The cash ratio, which is the most conservative liquidity ratio, saw fluctuations over the years, ranging from 0.35 in 2022 to 1.29 in 2020. In 2024, the cash ratio improved to 1.12, indicating that the company had $1.12 in cash and cash equivalents to cover each dollar of current liabilities. This suggests that Applied Materials Inc has a solid cash position to meet its short-term obligations.

Overall, despite some fluctuations, Applied Materials Inc has maintained a strong liquidity position over the years, as evidenced by its current, quick, and cash ratios remaining at healthy levels in 2024.

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See also:

Applied Materials Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Applied Materials Inc has shown a fluctuating trend over the past five years. In the most recent period, ending on October 27, 2024, the company's cash conversion cycle improved to 157.26 days, indicating a more efficient management of its working capital compared to the prior year. This reduction in the cash conversion cycle suggests that Applied Materials Inc has been able to convert its inventory and receivables into cash more quickly, potentially due to improved inventory management and customer payment collection processes.

Looking back over the five-year period, there were noticeable variations in the cash conversion cycle. The cycle was longest in October 30, 2022, at 190.42 days, indicating that the company took longer to convert its investment in raw materials into cash during that period. On the other hand, the shortest cash conversion cycle was observed on October 31, 2021, at 163.02 days, which may suggest more efficient operations during that year.

Overall, the trend in the cash conversion cycle for Applied Materials Inc displays a degree of variability, but the recent improvement in the cycle may signal enhanced working capital management and operational efficiency within the company.