ExlService Holdings Inc (EXLS)

The current ratio measures a company's ability to meet its short-term obligations with its current assets. ExlService Holdings Inc has shown a decreasing trend in its current ratio over the past five years, from 2.36 in 2019 to 2.08 in 2023. Although the current ratio remains above 1, indicating that the company has more than enough current assets to cover its current liabilities, the decreasing trend may suggest a potential weakening liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. ExlService Holdings Inc's quick ratio has followed a similar decreasing trend as the current ratio over the same period, going from 2.34 in 2019 to 2.07 in 2023. Despite the slight decline, the company still maintains a quick ratio above 1, indicating a strong ability to cover its short-term obligations with its most liquid assets.

The cash ratio specifically focuses on the company's ability to cover current liabilities with its cash and cash equivalents. ExlService Holdings Inc's cash ratio has fluctuated over the past five years but generally shows strong liquidity, with a ratio above 1 in all years except for 2021. The decrease in 2021 may be a cause for concern, as the company had a cash ratio of 0.73, indicating a potential short-term liquidity strain.

Overall, while ExlService Holdings Inc maintains a reasonable level of liquidity as indicated by its current, quick, and cash ratios, the decreasing trend in these ratios over the past few years, particularly the dip in 2021, suggests the need for close monitoring of the company's liquidity position to ensure it can meet its short-term obligations efficiently.

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Additional liquidity measure

The cash conversion cycle of ExlService Holdings Inc shows a fluctuating trend over the past five years. It increased from 64.26 days in 2019 to 65.40 days in 2021 and then decreased to 58.10 days in 2020 before rising again to 67.90 days in 2022 and further to 71.30 days in 2023.

A cash conversion cycle measures the time it takes for a company to convert its investments in inventory into cash received from customers. A longer cash conversion cycle may indicate inefficiencies in the company's working capital management, such as slow inventory turnover or extended accounts receivable collection periods.

Based on this trend, the company's working capital management may have deteriorated slightly in recent years, as indicated by the lengthening of the cash conversion cycle. It is important for ExlService Holdings Inc to focus on improving its inventory turnover and accelerating the collection of accounts receivable to shorten the cash conversion cycle and optimize its working capital efficiency.