Broadcom Inc (AVGO)

Broadcom Inc's liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to pay its short-term obligations with its short-term assets, was at its lowest in fiscal year 2020 at 1.87 and has since decreased further to 1.17 in fiscal year 2024. This indicates that the company may be less able to cover its current liabilities with its current assets over the past few years.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has followed a similar trend. It decreased from 1.56 in fiscal year 2020 to 0.82 in fiscal year 2024. This suggests that Broadcom Inc may have reduced ability to meet its short-term liabilities using its most liquid assets.

The cash ratio, an even more stringent indicator of liquidity that compares cash and cash equivalents to current liabilities, has also declined steadily over the period. It decreased from 1.20 in fiscal year 2020 to 0.56 in fiscal year 2024, indicating a potential decrease in the company's ability to cover its current liabilities with cash on hand.

Overall, the decreasing trend in Broadcom Inc's liquidity ratios over the past five years may raise concerns about the company's ability to cover its short-term obligations with its current assets and cash reserves. Investors and creditors may want to further investigate the reasons behind these declining liquidity ratios to assess the company's financial health and risk profile.

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See also:

Broadcom Inc Liquidity Ratios

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Additional liquidity measure

Broadcom Inc's cash conversion cycle has fluctuated over the past five years, with the cycle ranging from 33.13 days to 62.98 days. The company's cash conversion cycle measures the time it takes for Broadcom to convert its investments in inventory and other resources into cash from sales. A shorter cash conversion cycle indicates that Broadcom is efficiently managing its working capital and turning its inventory and accounts receivable into cash quickly.

In 2024, the cash conversion cycle decreased to 33.13 days, reflecting improved efficiency in managing inventory and collecting receivables compared to the previous year. The significant improvement in the cash conversion cycle may indicate better inventory management, quicker collection of accounts receivable, or more efficient payment of accounts payable.

Conversely, in 2022, the cash conversion cycle increased to 62.98 days, which suggests that Broadcom took longer to convert its inventory and receivables into cash, possibly indicating issues with inventory turnover or slower collection of accounts receivable. Furthermore, in 2023 and 2020, the cash conversion cycle was relatively higher, indicating that Broadcom faced challenges in managing working capital efficiently.

Overall, while the cash conversion cycle has shown fluctuations over the past five years, Broadcom's management should focus on optimizing inventory levels, improving accounts receivable collection, and managing payables effectively to enhance operational efficiency and cash flow management.