Extreme Networks Inc (EXTR)

The liquidity ratios of Extreme Networks Inc over the past five years show some fluctuations in the company's short-term financial health.

1. Current Ratio:
The current ratio measures the company's ability to pay its short-term obligations using its current assets. Extreme Networks' current ratio has fluctuated over the years, ranging from 0.90 in 2024 to 1.07 in 2021. A current ratio below 1 indicates that the company may have difficulties meeting its short-term obligations with its current assets alone.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of a company's liquidity by excluding inventory from current assets. Extreme Networks' quick ratio has also varied, with the lowest ratio of 0.48 in 2024 and the highest ratio of 0.89 in 2021. A quick ratio below 1 suggests that the company may struggle to meet its short-term obligations without relying on inventory.

3. Cash Ratio:
The cash ratio indicates the company's ability to cover its short-term liabilities with cash and cash equivalents. Extreme Networks' cash ratio has shown a decreasing trend over the years, reaching its lowest point of 0.30 in 2024. A cash ratio below 1 signifies that the company may have limited cash reserves to meet its immediate obligations.

Overall, Extreme Networks Inc's liquidity ratios suggest that the company may face challenges in meeting its short-term financial obligations without relying on additional sources of funding. Investors and creditors should closely monitor these ratios to assess the company's liquidity position and financial health.

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Additional liquidity measure

Extreme Networks Inc's cash conversion cycle has shown some fluctuations over the past five years. In Jun 2020, the company's cash conversion cycle was 54.73 days, indicating the number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

In the following years, the cash conversion cycle improved, reaching its lowest point in Jun 2022 at 45.90 days. This improvement suggests that Extreme Networks Inc may have been managing its inventory, accounts receivable, and accounts payable more efficiently during this period, reducing the time it takes to generate cash from its operations.

However, in Jun 2023 and Jun 2024, the cash conversion cycle increased to 47.32 days and 62.88 days, respectively. This rise may indicate potential challenges in managing working capital efficiency, possibly due to changes in the company's operations or market conditions.

Overall, Extreme Networks Inc's cash conversion cycle has shown variability over the years, highlighting the need for continued monitoring and management of working capital to ensure efficient cash flow generation from its operations.