Aspen Technology Inc (AZPN)

Aspen Technology Inc's liquidity ratios demonstrate the company's ability to meet its short-term obligations effectively. The current ratio, which measures the firm's ability to cover its current liabilities with current assets, has shown a positive trend over the past three years, standing at 2.60 in 2024 compared to 2.36 in 2023 and 3.48 in 2022. This indicates a strengthening liquidity position, as the company has significantly improved its ability to cover short-term obligations.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has remained relatively stable over the same period, standing at 1.04 in 2024, 1.03 in 2023, and 1.92 in 2022. While the quick ratio is lower than the current ratio, which is typical for companies with a significant amount of inventory, Aspen Technology Inc still maintains a healthy level of quick assets to cover its immediate liabilities.

Lastly, the cash ratio, which assesses the company's ability to cover its current liabilities with cash and cash equivalents only, has shown a decreasing trend from 1.49 in 2022 to 0.70 in 2024. This indicates a decreasing reliance on cash to meet short-term obligations, which could be a strategic move by the company to deploy excess cash in other growth opportunities or investments.

Overall, Aspen Technology Inc's liquidity ratios suggest a strong liquidity position, with the current ratio indicating a steady improvement in the company's ability to cover short-term obligations. The stable quick ratio demonstrates a consistent level of liquidity, while the declining cash ratio may reflect strategic decisions by the company to optimize cash utilization for long-term growth.

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Additional liquidity measure

Aspen Technology Inc's cash conversion cycle has shown a positive trend over the last three years. The company has effectively reduced its cash conversion cycle from 57.74 days in 2022 to 29.67 days in 2024. This indicates that Aspen Technology Inc has been able to convert its resources into cash more efficiently and in a shorter period. A decreasing cash conversion cycle suggests the company is managing its working capital effectively, which can lead to improved liquidity and financial performance. This positive trend indicates that Aspen Technology Inc has been successful in managing its inventory, accounts receivable, and accounts payable to optimize its cash flow conversion cycle.