PC Connection Inc (CNXN)

PC Connection Inc's liquidity ratios have shown a generally positive trend over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has steadily increased from 2.51 in 2019 to 3.20 in 2023. This indicates that the company has a stronger ability to meet its short-term obligations as it has more than enough current assets to cover its current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. PC Connection Inc's quick ratio has also shown an upward trend, increasing from 2.25 in 2019 to 2.93 in 2023. This suggests that the company has a higher proportion of highly liquid assets relative to its current liabilities, signaling a strong short-term financial position.

The cash ratio, which specifically looks at the company's ability to cover its current liabilities with cash and cash equivalents, has improved significantly over the years. PC Connection Inc's cash ratio has risen from 0.29 in 2019 to 0.91 in 2023. This indicates that the company has enhanced its ability to meet immediate obligations with readily available cash resources, which is a positive sign for its financial health.

Overall, PC Connection Inc's liquidity ratios have shown consistent improvement, reflecting a strengthened liquidity position and the company's ability to efficiently manage its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle (CCC) of PC Connection Inc has fluctuated over the past five years, indicating changes in the company's efficiency in managing its working capital. In general, the CCC represents the time it takes for a company to convert its investments in inventory and accounts receivable into cash flows from sales.

From December 31, 2019, to December 31, 2020, the CCC increased significantly from 63.58 days to 77.32 days, indicating a deterioration in the company's ability to efficiently manage its working capital. This may have been due to factors such as slower inventory turnover or longer collection periods for accounts receivable.

However, from December 31, 2020, to December 31, 2021, there was a marginal improvement in the CCC, decreasing to 72.88 days. This suggests that PC Connection Inc may have made some adjustments to its working capital management processes to shorten the cash conversion cycle.

Despite this improvement, the CCC increased again in the following year, reaching 75.10 days by December 31, 2022. This uptick may raise some concerns about the company's efficiency in converting inventory and receivables into cash.

Finally, by December 31, 2023, the CCC decreased to 66.58 days, showing a positive trend towards more efficient working capital management compared to the previous year. This improvement could be attributed to better inventory and receivables management practices or an increase in sales efficiency.

Overall, while there have been fluctuations in PC Connection Inc's cash conversion cycle over the past five years, the company seems to have made efforts to optimize its working capital efficiency, ultimately leading to a more favorable CCC by the end of 2023. Continued monitoring and adjustment of working capital processes will be crucial for maintaining this trend of improvement in the future.