Fabrinet (FN)

Fabrinet's liquidity ratios show a consistent pattern of improvement over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has steadily increased from 3.40 in 2020 to 3.61 in 2024. This indicates that Fabrinet has more than enough current assets to meet its short-term obligations, providing a strong buffer for creditors.

The quick ratio, also known as the acid-test ratio, focuses on the most liquid assets to cover current liabilities. Fabrinet's quick ratio has also shown improvement, increasing from 1.99 in 2021 to 2.60 in 2024. This signifies that the company has a healthy liquidity position, with a sufficient level of highly liquid assets to cover its short-term debts.

The cash ratio, which measures the company's ability to pay off its current liabilities with its cash and cash equivalents, has also exhibited a positive trend, rising from 1.46 in 2020 to 1.54 in 2024. This indicates that Fabrinet holds an increasing proportion of cash compared to its current liabilities, enhancing its ability to meet short-term obligations effectively.

Overall, Fabrinet's liquidity ratios demonstrate a strong financial position with ample liquidity to support its operations and meet its short-term financial obligations. The improving trend in these ratios reflects effective management of the company's working capital and liquidity management strategies over the years.

---

Additional liquidity measure

Fabrinet's cash conversion cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flow from sales. The trend in Fabrinet's cash conversion cycle over the past five years shows some fluctuations.

In particular, the cash conversion cycle decreased from 95.26 days in 2023 to 78.09 days in 2024, indicating an improvement in the company's efficiency in managing its working capital. This reduction suggests that Fabrinet has become more effective in converting its investments in inventory and other resources into cash flow over the past year.

Comparing the latest figure to the levels seen in previous years, Fabrinet's cash conversion cycle in 2024 is lower than in 2022 and 2023, but slightly higher than in 2020 and 2021. This indicates fluctuations in the company's working capital management efficiency over the years.

Overall, a decreasing trend in the cash conversion cycle is generally considered positive as it suggests that Fabrinet is becoming more efficient in managing its working capital and translating that into cash flow. However, it is crucial for the company to continue monitoring and improving its working capital management practices to ensure sustained efficiency.