AeroVironment Inc (AVAV)

The liquidity position of AeroVironment Inc. exhibits a generally strong and stable profile over the observed period, as reflected by its key liquidity ratios: the current ratio, quick ratio, and cash ratio.

Current Ratio Analysis:
The current ratio consistently remains above 3.0 throughout the reporting periods, indicating that the company maintains more than three times its current liabilities in current assets. Starting from approximately 4.05 as of January 2022, it experienced slight fluctuations but retained a favorable liquidity cushion, reaching a peak of 4.79 in October 2023. Although there was a decline to about 3.52 by April 2025, the ratio remains comfortably above the commonly acceptable threshold of 1.0, underscoring the company's ability to meet short-term obligations without undue liquidity stress.

Quick Ratio Analysis:
The quick ratio, which excludes inventory from current assets to assess immediate liquidity, follows a similar trend, remaining well above 2.0 in all periods. This ratio peaked at approximately 3.11 in October 2024, reflecting robust short-term liquidity. The slight decreases observed at times, such as down to 2.37 in April 2024 and 2.78 in April 2025, still indicate adequate liquid assets available to settle current liabilities quickly, without reliance on inventory liquidation.

Cash Ratio Analysis:
The cash ratio, the most conservative liquidity measure, stays relatively stable above 0.9 for most periods, although it declines below 1.0 in some instances, notably dropping to approximately 0.36 by April 2025. Historically, the cash ratio was near 1.0 or slightly above in earlier periods, showcasing ample cash reserves for immediate liabilities. The declining trend toward lower levels indicates decreasing cash holdings in recent periods, potentially reflecting strategic cash utilization or investment activities, but still suggests a basic capacity to cover immediate short-term liabilities with available cash.

Overall Summary:
AeroVironment Inc. exhibits a strong liquidity position characterized by high current and quick ratios, suggesting effective management of current assets relative to current liabilities. The ratios' stability and historical levels above critical thresholds reinforce the company's capacity to meet short-term obligations comfortably. The gradual decline in the cash ratio warrants attention, as it indicates a decrease in cash reserves, but it remains within a range that still provides a reasonable buffer for immediate liquidity needs. Overall, the company's liquidity ratios depict a sound liquidity framework with resilience to short-term financial stresses.

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Additional liquidity measure

The analysis of AeroVironment Inc.'s cash conversion cycle (CCC) over the provided period reveals notable fluctuations and a general trend of variability in operational efficiency. The CCC measures the time span, in days, between the cash outlay for inventory and the cash inflow from receivables, reflecting the company's effectiveness in managing its working capital.

From January 31, 2022, the CCC was approximately 212.74 days, indicating that it took roughly 213 days to convert investments in inventory and receivables into cash flows. This figure remained relatively stable through the first half of 2022, with slight increases and decreases, reaching a peak of around 214.25 days by April 30, 2022, and decreasing to approximately 186.35 days by October 29, 2022.

Subsequent data points highlight an upward trend commencing in early 2023, with significant increases in the CCC. By July 31, 2023, the cycle extended to approximately 240.48 days, and then further to 247.21 days by October 31, 2023. Such an extension suggests a lengthening in the time required for the company to convert its working capital investments into cash, which could indicate increased inventory holding periods, longer receivables collection periods, or both.

Interestingly, in early 2024, the CCC decreased markedly to around 199.29 days as of January 31, 2024, implying some operational improvements or changes in working capital management. This reduction continued into April 2024, with the cycle at approximately 205.31 days, before again decreasing to about 195.19 days in July 2024. The subsequent months reflected a modest upward adjustment to 210.61 days by October 31, 2024.

Looking ahead into 2025, the CCC appears to have stabilized at higher levels, with values around 232.96 days in January and approximately 233.51 days by April, indicating a return to extended cycle durations similar to peak levels observed in late 2023.

Overall, the company's cash conversion cycle exhibits significant fluctuations over the analyzed period, with notable peaks in late 2023 and early 2025, and intermittent periods of improvement. These variations suggest dynamic changes in inventory management, receivables collection, or payables deferral policies, impacting operational liquidity and efficiency. Continuous monitoring of the CCC and its underlying components would be essential for assessing the company's working capital effectiveness and potential operational bottlenecks.