Arlo Technologies (ARLO)

The liquidity ratios of Arlo Technologies Inc over the past five years show a mixed performance in terms of short-term financial health and ability to meet its current obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has been relatively stable over the years, ranging from 1.43 to 1.60. A current ratio above 1 indicates that the company has more current assets than current liabilities, suggesting a healthy liquidity position. Arlo Technologies Inc's current ratio has mostly been above 1, indicating sufficient short-term liquidity.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Arlo Technologies Inc's quick ratio has fluctuated between 1.15 and 1.36 over the past five years. A quick ratio above 1 indicates that the company can meet its short-term liabilities without relying on selling inventory, which is generally considered a positive sign. While the company's quick ratio has shown some variability, it has generally remained above 1, indicating a reasonable ability to meet short-term obligations.

The cash ratio, which is the most conservative measure of liquidity, calculates the company's ability to cover its current liabilities using only cash and cash equivalents. Arlo Technologies Inc's cash ratio has ranged from 0.74 to 0.93 over the past five years. A cash ratio above 1 would mean the company holds more cash than its current liabilities, which is rarely seen in practice. The company's cash ratio has consistently been below 1, suggesting that it relies on sources other than cash to meet its short-term obligations.

Overall, the liquidity ratios of Arlo Technologies Inc indicate a reasonably healthy liquidity position, with the current and quick ratios generally above 1, reflecting a sufficient level of current assets to cover short-term liabilities. However, the company's cash ratio remaining consistently below 1 indicates a reliance on assets other than cash to meet short-term obligations. It is essential for the company to maintain a balance between current assets and liabilities to ensure continued financial stability.

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Additional liquidity measure

The cash conversion cycle of Arlo Technologies Inc has shown fluctuations over the past five years, reflecting changes in the company's efficiency in managing its working capital.

In 2023, the cash conversion cycle decreased to 29.63 days, indicating that Arlo Technologies has improved its ability to convert its investments in inventory into cash quickly. This may suggest better inventory management and faster collection of receivables, leading to a more efficient cash flow cycle.

In 2022, the cash conversion cycle increased to 43.35 days from the previous year. This increase could be attributed to slower inventory turnover or delays in collecting receivables, which may have impacted the company's cash flow efficiency negatively.

The cash conversion cycle was at its lowest in 2021, at 15.74 days, indicating a significant improvement in efficiency compared to the prior years. This suggests that Arlo Technologies was able to manage its working capital effectively, leading to a quicker conversion of inventory and receivables into cash.

In 2020 and 2019, the cash conversion cycle was significantly higher at 82.41 days and 78.60 days, respectively. These elevated levels suggest that the company may have faced challenges in managing its working capital efficiently during those years, leading to slower cash conversion cycles.

Overall, fluctuations in the cash conversion cycle of Arlo Technologies Inc over the past five years highlight the importance of effectively managing working capital components such as inventory, payables, and receivables to optimize cash flow efficiency.