AeroVironment Inc (AVAV)

The liquidity ratios of AeroVironment Inc. over the period from April 2021 to April 2025 exhibit a general trend of decline, although some fluctuations are observed.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, started at 4.18 in April 2021 and decreased to 3.64 in April 2022. Thereafter, it showed a slight rebound to 3.93 in April 2023, followed by a decline to 3.56 in April 2024 and marginally to 3.52 in April 2025. Despite this decline, the ratio remains well above the commonly accepted benchmark of 1.0, indicating that the company maintains a comfortable level of current assets relative to its current liabilities.

The quick ratio, which excludes inventories and other less liquid assets from current assets, followed a similar pattern. It decreased from 3.27 in April 2021 to 2.63 in April 2022, then increased slightly to 2.69 in April 2023. The ratio continued to decline to 2.37 in April 2024 before rising modestly to 2.51 in April 2025. This trend indicates that AeroVironment Inc. consistently maintains a strong liquidity position in terms of highly liquid assets, although the ratio has experienced minor fluctuations.

The cash ratio, a more conservative indicator reflecting the company's ability to cover short-term obligations with cash and cash equivalents, declined markedly from 1.88 in April 2021 to 1.01 in April 2022. It further decreased to 1.09 in April 2023, but then saw a significant drop to 0.51 in April 2024 and continued downward to 0.24 in April 2025. The decline in the cash ratio suggests that the company's cash holdings relative to current liabilities have diminished over time, potentially indicating reduced liquidity in immediate cash terms.

Overall, AeroVironment Inc. maintains robust current and quick ratios, signifying healthy liquidity and a strong ability to meet short-term liabilities with its liquid assets and current assets. However, the notable decline in the cash ratio over the analyzed period warrants attention, as lower cash reserves could pose risks in meeting urgent short-term obligations without liquidating other assets.

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Additional liquidity measure

The cash conversion cycle (CCC) of AeroVironment Inc. demonstrates a trend of increasing duration over the period from April 2021 to April 2025, with notable fluctuations during this timeframe. As of April 30, 2021, the CCC was approximately 198.27 days, indicating the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. By April 30, 2022, the CCC rose to approximately 220.53 days, reflecting an elongation of around 22.26 days in the cycle.

This upward trajectory continued through April 30, 2023, reaching approximately 237.38 days, representing a further increase of about 16.85 days. The trend then exhibited a slight decrease by April 30, 2024, when the cycle shortened to around 223.30 days, a reduction of approximately 14.08 days. However, the most recent data point as of April 30, 2025, shows the CCC rising again to approximately 258.62 days, marking the longest cycle within this period and an increase of approximately 35.32 days from the previous year.

Overall, the data indicates that AeroVironment Inc.'s cash conversion cycle has experienced periods of both elongation and slight contraction, with a general upward trend over the five-year span. The increasing CCC suggests that the company has been taking more time to convert its investments into cash, which could be attributable to longer inventory turnover periods, extended receivables collection times, or a combination of these factors. This pattern warrants further investigation into the company’s operational practices, credit policies, and inventory management to assess implications for liquidity and operational efficiency.