Flex Ltd (FLEX)

Flex Ltd's current ratio has shown a fluctuating trend over the past five years, ranging from 1.30 to 1.52. The current ratio measures the company's ability to cover its short-term liabilities with its current assets. A current ratio above 1 generally indicates the company is able to meet its short-term obligations, with a higher ratio implying a stronger liquidity position. Although the current ratio decreased slightly from 2021 to 2022, it has since increased and remained relatively stable, reaching 1.48 in 2023 and 1.52 in 2024. This indicates that Flex Ltd has maintained a healthy level of current assets relative to its current liabilities in recent years.

On the other hand, the quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, has shown a decreasing trend from 0.88 in 2021 to 0.61 in 2025. This indicates that Flex Ltd's ability to cover its short-term liabilities with its most liquid assets has weakened over the years. A quick ratio above 1 is considered satisfactory, but a downward trend in this ratio may raise concerns about the company's liquidity position. Flex Ltd's decreasing quick ratio suggests a potential liquidity risk that may require closer monitoring and management attention.

Furthermore, the cash ratio, which specifically focuses on the company's ability to cover its current liabilities with cash and cash equivalents, has also exhibited a declining trend from 0.34 in 2021 to 0.23 in 2025. A declining cash ratio indicates that Flex Ltd's reliance on cash to meet its short-term obligations has decreased over the years. While a higher cash ratio is generally preferable, a decreasing trend may signal reduced financial flexibility and liquidity challenges. Flex Ltd may need to evaluate its cash management strategies to ensure adequate liquidity to meet its short-term obligations effectively.

In summary, Flex Ltd's current ratio has remained relatively stable and above 1, indicating a satisfactory ability to cover its short-term liabilities with current assets. However, the decreasing trends in the quick ratio and cash ratio highlight potential liquidity risks that warrant further attention and proactive management to maintain a sound liquidity position in the future.

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Additional liquidity measure

Flex Ltd's cash conversion cycle has shown variations over the past five years. As of March 31, 2021, the company had a cash conversion cycle of 42.17 days, indicating a relatively efficient cash management process. However, in the subsequent years, the cash conversion cycle has increased significantly, reaching 62.85 days by March 31, 2022, and further rising to 70.57 days by March 31, 2023.

The trend continued with a slight increase to 71.18 days by March 31, 2024, suggesting potential challenges in managing cash flow, inventory, and receivables effectively. However, there was a notable improvement by March 31, 2025, with the cash conversion cycle declining to 50.74 days.

Overall, the fluctuation in Flex Ltd's cash conversion cycle over the five-year period may indicate changes in the company's operational efficiency, working capital management, and liquidity position. It is essential for the company to closely monitor and address the factors impacting its cash conversion cycle to ensure optimal cash flow management and sustainable financial performance.