Electronic Arts Inc (EA)

Electronic Arts Inc's liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to cover short-term obligations with its current assets, has shown some variability but generally remains above 1, indicating that the company has sufficient current assets to meet its current liabilities. However, it is noteworthy that the current ratio has been on a declining trend since 2021, which suggests a potential decrease in liquidity.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also exhibits fluctuation over the period. Similar to the current ratio, the quick ratio has remained above 1, indicating that Electronic Arts Inc can meet its short-term obligations even without relying on inventory. However, the decreasing trend in the quick ratio since 2021, similar to the current ratio, may raise concerns about the company's liquidity position.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents to cover current liabilities, has also fluctuated over the years. While the cash ratio has generally been above 1, implying that the company holds sufficient cash to pay off its short-term debts, the declining trend since 2021 is a point of consideration.

Overall, the varying trends in Electronic Arts Inc's liquidity ratios suggest a potential weakening of the company's liquidity position in recent years. It would be prudent for investors and stakeholders to closely monitor the company's liquidity management strategies to ensure it can meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Electronic Arts Inc has shown improvement over the last five years. In the fiscal year ending March 31, 2024, the company's cash conversion cycle decreased to 3.79 days, indicating a more efficient management of working capital compared to the previous years.

In the fiscal years ending March 31, 2023, March 31, 2022, March 31, 2021, and March 31, 2020, the cash conversion cycles were 13.46 days, 14.11 days, 10.33 days, and 12.26 days respectively. This trend suggests that Electronic Arts Inc has been able to streamline its operating cycle, which includes the time it takes to convert inventory into cash through sales and subsequent collection of accounts receivable.

A lower cash conversion cycle signifies that the company is managing its inventory levels and receivables efficiently, potentially leading to better liquidity and financial performance. It indicates that Electronic Arts Inc is converting its investments in inventory and accounts receivable into cash more quickly, which can positively impact its overall working capital management.