Cognex Corporation (CGNX)

Cognex Corporation's liquidity ratios indicate the ability of the company to meet its short-term obligations efficiently. The current ratio, which measures the firm's ability to cover its short-term liabilities with its current assets, has shown a general decreasing trend over the past five years, from 4.55 in 2020 to 3.62 in 2024. Despite this decline, the current ratio remains strong, suggesting that Cognex has sufficient current assets to cover its current liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also saw a decreasing trend over the same period, from 3.81 in 2020 to 2.32 in 2024. This suggests that Cognex may have become slightly less liquid in terms of its ability to meet short-term obligations without relying on selling inventory.

The cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, has also shown a decline over the years, from 2.81 in 2020 to 1.45 in 2024. This indicates that the company's ability to cover its current liabilities solely with cash has decreased.

Overall, while there has been a slight decline in liquidity ratios over the years, Cognex Corporation still maintains healthy liquidity levels, suggesting that the company is capable of meeting its short-term obligations without significant strain on its financial resources.

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Additional liquidity measure

The cash conversion cycle of Cognex Corporation has shown some fluctuations over the past five years. In 2020, the company had a cash conversion cycle of 90.40 days, which decreased slightly to 90.08 days in 2021. However, there was a significant increase in the cash conversion cycle to 104.28 days in 2022. This trend continued as the cycle extended to 140.17 days in 2023 before decreasing to 122.14 days in 2024.

The increasing trend in the cash conversion cycle from 2020 to 2023 indicates that Cognex Corporation took longer to convert its investments in inventory and accounts receivable into cash during those years. This may suggest potential issues in managing inventory levels or collecting receivables efficiently. The decrease in 2024 could signify improvements in managing working capital and liquidity.

Overall, a higher cash conversion cycle means that a company takes longer to convert its investments into cash, which can tie up resources and impact liquidity. Monitoring and managing the cash conversion cycle is crucial for optimizing working capital efficiency and maintaining financial health.