Flex Ltd (FLEX)

Flex Ltd's liquidity ratios have shown mixed performance over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has generally been above 1, indicating a healthy level of liquidity. The ratio has been fluctuating within a range of 1.26 to 1.52, with the highest value in the most recent year, March 31, 2024.

On the other hand, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown stability above 0.5. While the ratio has fluctuated between 0.59 and 0.86, it indicates that Flex Ltd has a moderate ability to meet its short-term obligations with its most liquid assets.

The cash ratio, which is the most conservative measure of liquidity, has also demonstrated a consistent performance above 0.25 over the five-year period. The ratio has ranged from 0.27 to 0.34, suggesting that Flex Ltd has maintained a sufficient level of cash to cover its current liabilities.

Overall, Flex Ltd's liquidity ratios indicate a generally solid liquidity position, with the company being able to meet its short-term obligations comfortably. However, management should continue to monitor these ratios closely to ensure that liquidity remains at an optimal level to support the company's operations and future growth.

---

Additional liquidity measure

Flex Ltd's cash conversion cycle has been increasing over the past five years, indicating a lengthening time it takes for the company to convert its resources into cash. In the most recent fiscal year ending March 31, 2024, the cash conversion cycle stood at 66.98 days, compared to 66.03 days in the previous year. This suggests a slight deterioration in efficiency.

Looking back further, there was a notable increase in the cash conversion cycle from 16.60 days in March 2020 to 52.20 days in March 2022, indicating a significant change in the company's working capital management practices. The steady increase over the years could be a potential concern as it may indicate issues with inventory management, accounts receivable collection, or payment of accounts payable.

Flex Ltd may need to evaluate its operational processes to streamline working capital management and improve efficiency in converting its assets into cash. A cash conversion cycle that is too long could tie up valuable resources and impact the company's overall financial health and liquidity position.