Fabrinet (FN)

The analysis of Fabrinet's liquidity ratios over the period from June 30, 2021, to June 30, 2025, reveals a generally stable and healthy liquidity position, with fluctuations that reflect the company's capacity to meet short-term obligations.

The current ratio, which measures the company's ability to cover its current liabilities with its current assets, exhibits a positive trend with some fluctuations. It declined slightly from 3.04 in 2021 to 2.83 in 2022, indicating a minor reduction in short-term liquidity. However, it increased thereafter, reaching 3.43 in 2023 and further rising to 3.61 in 2024, before experiencing a slight decrease to 3.00 in 2025. These levels suggest that Fabrinet consistently maintains a comfortable buffer of current assets relative to its current liabilities, with ratios well above the typical threshold of 1.5 that signals healthy liquidity.

The quick ratio, which refines this assessment by excluding inventory from current assets, follows a similar pattern. It decreased from 2.02 in 2021 to 1.73 in 2022, then increased substantially to 2.25 in 2023 and further to 2.60 in 2024. In 2025, the ratio decreased slightly to 2.09. This indicates that, even after excluding less liquid assets like inventory, the firm retains robust short-term liquidity. The ratios staying above 1 suggest that Fabrinet primarily relies on its more liquid assets—cash and receivables—to meet immediate liabilities.

The cash ratio, which is an even more conservative measure of liquidity, also reflects generally strong short-term financial health. It declined from 1.23 in 2021 to 0.89 in 2022 but then increased to 1.14 in 2023 and peaked at 1.54 in 2024. The ratio decreased again to 1.15 in 2025. Nonetheless, the cash ratio remaining above 1 during most of the period indicates that the company held sufficient cash and cash equivalents to cover its current liabilities, providing an additional safety margin.

Overall, the progression of these liquidity ratios demonstrates that Fabrinet has maintained a solid liquidity position throughout the period. The ratios suggest a well-managed short-term financial profile with ample liquidity, capable of supporting operational needs and short-term obligations even amidst minor fluctuations. This consistent liquidity strength indicates effective liquidity management and a generally conservative approach toward maintaining cash and liquid assets relative to current liabilities.

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Additional liquidity measure

The provided data illustrates the trend in Fabrinet's cash conversion cycle (CCC) over a four-year period from June 30, 2021, to June 30, 2025.

Initially, the CCC was 84.31 days as of June 30, 2021, indicating the average time it took for the company to convert its investments in inventory and other resources into cash flows from sales. Over the subsequent year, the CCC increased to 94.65 days by June 30, 2022, reflecting a lengthening of the cycle. This suggests either a longer inventory period, extended receivables, or a combination of both, which could have implications for working capital management during that period.

In the following year, the CCC remained relatively stable, rising marginally to 95.26 days as of June 30, 2023. This stabilization implies that the company faced persistent challenges in shortening its cash conversion cycle during this period, possibly due to operational or industry-specific factors.

However, a notable improvement occurred starting in the fiscal year ending June 30, 2024, when the CCC decreased significantly to 78.09 days. This reduction indicates improvements in either receivables collection, inventory turnover, or both. The continued decline to 74.16 days by June 30, 2025, underscores ongoing enhancements in working capital efficiency and cash flow management.

Overall, the trend suggests that after experiencing a peak in the cash conversion cycle in 2022 and 2023, Fabrinet implemented measures that effectively shortened the cycle in subsequent years, leading to a more efficient working capital management. The reduction in the CCC from its peak points to a strengthening of the company's operational efficiencies and liquidity position over the analyzed period.