Alpha and Omega Semiconductor Ltd (AOSL)

Alpha and Omega Semiconductor Ltd has shown consistent improvement in its liquidity ratios over the past five years. The current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, has been steadily increasing from 1.66 in 2020 to 2.58 in 2024. This suggests that the company has a strong ability to meet its short-term obligations.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown improvement over the years, increasing from 0.89 in 2020 to 1.24 in 2024. This indicates that the company can meet its short-term obligations without relying on selling off inventory.

The cash ratio, which measures the company's ability to cover its current liabilities using only cash and cash equivalents, has also shown a positive trend, increasing from 0.83 in 2020 to 1.14 in 2024. This implies that the company has sufficient cash on hand to meet its immediate liabilities.

Overall, the liquidity ratios of Alpha and Omega Semiconductor Ltd reflect a healthy financial position, with improving liquidity and a strong ability to meet its short-term obligations.

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Additional liquidity measure

Alpha and Omega Semiconductor Ltd's cash conversion cycle has shown a fluctuating trend over the past five years. The cycle, which represents the time it takes for a company to convert its resources into cash flows, has increased from 60.21 days in 2020 to 155.90 days in 2024. This indicates that the company may be facing challenges in efficiently managing its working capital.

The significant spike in the cash conversion cycle in 2024 compared to the previous years suggests that Alpha and Omega Semiconductor Ltd may be experiencing delays in collecting payments from customers or managing inventory levels effectively. This prolonged cash conversion cycle could potentially strain the company's liquidity position and overall financial performance if not addressed timely.

It is crucial for Alpha and Omega Semiconductor Ltd to closely monitor and improve its cash conversion cycle to enhance operational efficiency and optimize its working capital management. By streamlining processes related to accounts receivable, inventory, and accounts payable, the company can potentially shorten its cash conversion cycle and strengthen its financial position in the long run.