Arrow Electronics Inc (ARW)

Arrow Electronics Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

1. Current Ratio: Arrow Electronics Inc's current ratio has been relatively stable over the years, ranging from 1.39 to 1.48, with an average of about 1.43. This suggests that the company has sufficient current assets to cover its current liabilities. A current ratio above 1 indicates that Arrow Electronics Inc can readily meet its short-term debt obligations.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Arrow Electronics Inc's quick ratio has fluctuated slightly between 0.94 and 1.05, with an average of around 1.01. This implies that the company has an adequate level of liquid assets to cover its immediate liabilities, excluding inventories.

3. Cash Ratio: The cash ratio measures the ability of a company to cover its current liabilities with cash and cash equivalents alone. Arrow Electronics Inc's cash ratio has been low, ranging from 0.01 to 0.05, indicating that the company holds a minimal amount of cash relative to its current liabilities. This suggests that Arrow Electronics Inc may need to rely more on its other liquid assets to meet its short-term obligations.

Overall, based on these liquidity ratios, Arrow Electronics Inc appears to have a healthy liquidity position, with the current and quick ratios consistently above 1, indicating a strong ability to meet its short-term debt obligations. However, the low cash ratio suggests that the company may need to manage its cash position more effectively to ensure sufficient liquidity in the future.

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Additional liquidity measure

Arrow Electronics Inc's cash conversion cycle has been gradually increasing over the years. Starting at 50.57 days on December 31, 2020, it has extended to 76.42 days by December 31, 2024. This suggests that the company is taking longer to convert its investments in inventory and receivables into cash. A longer cash conversion cycle may indicate inefficiencies in managing working capital, potentially tying up resources and impacting cash flow. Arrow Electronics Inc may need to review its inventory management and accounts receivable practices to improve its cash conversion cycle efficiency and overall liquidity position.