Broadcom Inc (AVGO)
Liquidity ratios
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Nov 1, 2020 | Nov 3, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 2.82 | 2.62 | 2.64 | 1.87 | 1.44 |
| Quick ratio | 2.34 | 2.18 | 2.27 | 1.56 | 1.21 |
| Cash ratio | 1.92 | 1.76 | 1.94 | 1.20 | 0.73 |
Broadcom Inc's liquidity ratios indicate the company's ability to meet short-term financial obligations and effectively manage its current assets.
The current ratio, which measures the company's ability to pay its short-term liabilities with its current assets, has shown a consistent improvement over the past five years, increasing from 1.44 in 2019 to 2.82 in 2023. This indicates a healthy level of current assets relative to current liabilities, suggesting improved liquidity and financial stability.
The quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also demonstrates a positive trend, rising from 1.31 in 2019 to 2.56 in 2023. This improvement signifies a stronger ability to cover short-term obligations with more liquid assets, such as cash and marketable securities.
Furthermore, the cash ratio, a stringent measure of liquidity that focuses solely on cash and cash equivalents, has consistently increased over the past five years, reaching 2.13 in 2023 from 0.84 in 2019. This indicates a healthier cash position and a greater ability to cover short-term liabilities with cash on hand.
Overall, the improving trends in all three liquidity ratios suggest that Broadcom Inc's short-term liquidity position has strengthened over the years, reflecting effective management of current assets and liabilities, and reducing the risk of insolvency or liquidity challenges in the short term.
See also:
Additional liquidity measure
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Nov 1, 2020 | Nov 3, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 54.70 | 62.98 | 34.80 | 40.97 | 53.33 |
The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower CCC is typically preferred as it indicates a shorter time for a company to recoup its investment and generate cash.
Looking at the data for Broadcom Inc over the past five years, we can observe fluctuations in its cash conversion cycle:
- In October 29, 2023, the CCC stood at 59.22 days, which reflects the time it takes for Broadcom to convert its resource investments into cash flows from sales. This suggests an increase in the time it takes to convert these investments into cash flows in comparison to previous years.
- In October 30, 2022, the CCC increased to 73.50 days, signifying a considerable delay in the conversion of Broadcom's investments into cash flows from sales.
- In October 31, 2021, the CCC decreased to 38.29 days, indicating an improvement in the time it took for Broadcom to convert its investments into cash flows in comparison to the previous years.
- In November 1, 2020, the CCC was 44.45 days, showing a slight increase in the time it took for Broadcom to convert its investments into cash flows from sales.
- In November 3, 2019, the CCC was 53.67 days, representing an increase from the previous year.
The fluctuations in Broadcom Inc's cash conversion cycle indicate changes in its ability to efficiently manage its working capital and inventory turnover. A longer cash conversion cycle may be indicative of challenges in managing inventory, collecting receivables, or dealing with payment of payables. Conversely, a shorter CCC reflects efficient management of working capital.
Overall, Broadcom Inc should focus on managing its working capital more efficiently to reduce the time it takes to convert investments into cash flows from sales, which could positively impact its liquidity and financial performance.