Diodes Incorporated (DIOD)

Diodes Incorporated has shown a consistent improvement in its current ratio over the years, indicating a strengthening liquidity position. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has increased from 2.01 in 2020 to 3.26 in 2024. This suggests that Diodes has more than enough current assets to meet its short-term liabilities.

Similarly, the quick ratio, also known as the acid-test ratio, has also shown an upward trend, further confirming the company's improved liquidity position. The quick ratio takes into account only the most liquid assets (such as cash and accounts receivable) to cover current liabilities, excluding inventory. Diodes' quick ratio has risen from 0.54 in 2020 to 0.84 in 2024, indicating a healthier liquidity position.

Furthermore, the cash ratio, a more stringent measure of liquidity that focuses solely on cash and cash equivalents compared to current liabilities, has also displayed an increasing trend from 0.54 in 2020 to 0.84 in 2024. This suggests that Diodes has a strong ability to cover its short-term obligations with its readily available cash resources.

Overall, the liquidity ratios of Diodes Incorporated reflect a positive liquidity position and indicate the company's ability to meet its short-term obligations comfortably with its current assets and cash reserves.

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Additional liquidity measure

Diodes Incorporated's cash conversion cycle has shown mixed performance over the past five years. In 2020, the cash conversion cycle was 140.43 days, indicating that, on average, it took the company approximately 140 days to convert its investments in inventory and receivables into cash.

However, in 2021 and 2022, the cash conversion cycle improved to 112.13 days and 112.08 days, respectively, suggesting that Diodes Incorporated was able to more efficiently manage its working capital and convert it into cash quicker during these years.

In 2023, there was a slight increase in the cash conversion cycle to 141.76 days, indicating a potential slowdown in the conversion of assets into cash.

The most significant increase was observed in 2024, where the cash conversion cycle jumped to 198.06 days. This substantial increase may raise concerns about the company's ability to manage its working capital efficiently and convert it into cash in a timely manner.

Overall, it is essential for Diodes Incorporated to closely monitor and manage its cash conversion cycle to ensure optimal liquidity and operational efficiency in the future.