Alpha and Omega Semiconductor Ltd (AOSL)

The liquidity position of Alpha and Omega Semiconductor Ltd, as reflected through its key liquidity ratios over the period from June 2020 to March 2025, indicates a generally stable and improving financial health in terms of short-term assets to meet short-term obligations.

Current Ratio Analysis:
The current ratio, which measures the company’s ability to cover its current liabilities with its current assets, demonstrates a consistent upward trend. Starting at 1.66 in June 2020, it steadily increased over the years, reaching a peak of 2.62 in December 2021. Following this peak, a slight decline is observed, with the ratio settling around 2.47 in March 2024. The ratio remains comfortably above the generally accepted benchmark of 1.0, indicating that the company maintains sufficient current assets to cover its short-term liabilities, with a solid margin of safety.

Quick Ratio Analysis:
The quick ratio, a more stringent indicator excluding inventory from assets, also displayed an upward trend initially, beginning at 0.89 in June 2020 and climbing to a high of 1.84 in December 2021. Post-2021, there is a gradual decrease, with the ratio settling around 1.28 in March 2025. Notably, an exceptional spike occurred at December 2024, reaching 3.76, which suggests a significant increase in liquid assets relative to current liabilities at that point. Throughout the period, the quick ratio generally remains above 1, reflecting a sound ability to meet short-term obligations with liquid assets, particularly in later years.

Cash Ratio Analysis:
The cash ratio, the most conservative liquidity measure, also shows a trajectory of improvement. Starting at 0.83 in June 2020, it mirrors the other ratios with a gradual increase, reaching over 1.5 during December 2021 and early 2022. A notable peak appeared at December 2024, where the ratio surged to 3.56, indicating a substantial amount of cash relative to current liabilities. Subsequently, it declined back to around 1.09 by March 2025, still remaining comfortably above the critical threshold of 0.2, which suggests adequate liquidity in terms of cash holdings.

Overall Assessment:
Across the evaluated period, Alpha and Omega Semiconductor Ltd exhibited a positive trend in liquidity ratios, signaling a strengthened liquidity position over time. The ratios' values consistently remained above critical levels, illustrating the company's capability to meet its short-term liabilities without liquidity stress. The peaks in December 2021 and December 2024 highlight periods of high liquid asset accumulation, potentially linked to strategic cash management, operational surpluses, or timing of liabilities. These trends collectively suggest prudent liquidity management and financial stability relative to short-term obligations over the analyzed timeline.

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Additional liquidity measure

The analysis of Alpha and Omega Semiconductor Ltd's cash conversion cycle (CCC) over the period from June 30, 2020, to March 31, 2025, reveals a noteworthy upward trend. Initially, the CCC was approximately 60.15 days in June 2020, indicating a relatively efficient conversion process from inventory and receivables to cash collection. However, over the subsequent periods, the cycle extended steadily, reaching 132.91 days by December 2023.

This extension demonstrates a significant increase of roughly 72.76 days over the span of three years. The rising CCC suggests that the company has been experiencing longer durations in converting its investments in inventory and receivables into cash. The increasing trend continues into 2024 with a slight decline observed in the March 2025 figure of 112.38 days, yet the overall cycle remains substantially longer than the initial period in 2020.

The ongoing elongation of the cash conversion cycle may be indicative of several factors, including longer inventory holding periods, delays in receivables collection, or a strategic shift affecting the working capital components. The notable escalation in the CCC could potentially impact liquidity and working capital management, requiring strategic adjustments to optimize cash flow efficiency.

Overall, the detailed historical data underscores a persistent trend of increasing operational cycle duration, highlighting areas for potential improvement in the company's receivables and inventory management processes.