AeroVironment Inc (AVAV)
Liquidity ratios
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 3.56 | 3.93 | 3.64 | 4.18 | 7.53 |
| Quick ratio | 2.37 | 2.69 | 2.63 | 3.27 | 6.75 |
| Cash ratio | 0.51 | 1.09 | 1.01 | 1.88 | 4.52 |
The liquidity ratios of AeroVironment Inc, as shown in the table, indicate the company's ability to meet its short-term obligations using its current assets.
1. Current Ratio:
- The current ratio measures the company's ability to pay its short-term liabilities with its current assets. The trend in AeroVironment's current ratio over the past five years shows a slight decrease, from 7.53 in 2020 to 3.56 in 2024. This indicates that the company may have relatively fewer current assets available to cover its current liabilities in recent years.
2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. AeroVironment's quick ratio has also shown a decreasing trend over the years, dropping from 6.75 in 2020 to 2.37 in 2024. This suggests that the company may have a reduced ability to cover its short-term obligations without relying on inventories.
3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, focusing solely on the company's ability to pay off its current liabilities using only cash and cash equivalents. AeroVironment's cash ratio has significantly decreased from 4.52 in 2020 to 0.51 in 2024. This indicates that the company may have less cash on hand relative to its current liabilities in recent years.
Overall, the declining trends in AeroVironment's liquidity ratios, particularly in the quick and cash ratios, suggest a potential weakening of the company's short-term financial position. It may be important for the company to closely monitor its liquidity levels and actively manage its working capital to ensure it can meet its short-term obligations effectively.
Additional liquidity measure
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 203.49 | 186.09 | 186.23 | 168.25 | 161.23 |
The cash conversion cycle of AeroVironment Inc has shown fluctuations over the past five years. The company's cash conversion cycle increased from 161.23 days in 2020 to 203.49 days in 2024, indicating a lengthening of the time it takes for the company to convert its investments in inventory and other resources into cash from sales.
Although the cash conversion cycle increased from 2023 to 2024, it exhibited a general upward trend over the five-year period. This suggests potential challenges or inefficiencies in managing the company's working capital and liquidity. A longer cash conversion cycle can tie up funds in inventory and accounts receivable, potentially impacting the company's overall cash flow and liquidity position.
It would be advisable for AeroVironment Inc to closely monitor and analyze the components of its cash conversion cycle, such as inventory turnover and accounts receivable collection periods, to identify areas for improvement in working capital management. Addressing any inefficiencies in the cash conversion cycle could help enhance the company's operational efficiency and cash flow management in the future.