FormFactor Inc (FORM)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 4.38 | 3.17 | 3.52 | 3.15 | 3.07 |
| Quick ratio | 3.29 | 2.18 | 2.63 | 2.35 | 2.33 |
| Cash ratio | 2.50 | 1.59 | 1.86 | 1.65 | 1.62 |
FormFactor Inc's liquidity ratios have shown a consistent improvement over the past five years, indicating a strong financial position in terms of short-term liquidity.
The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, has steadily increased from 3.07 in 2019 to 4.38 in 2023. This indicates that FormFactor Inc has more than enough current assets to cover its current liabilities, providing a comfortable margin of safety.
The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown an upward trend, from 2.33 in 2019 to 3.29 in 2023. This suggests that the company has a strong ability to meet its short-term obligations even if inventory cannot be converted to cash quickly.
Furthermore, the cash ratio, which is the most conservative measure of liquidity as it compares cash and cash equivalents to current liabilities, has also improved over the years. FormFactor Inc's cash ratio has increased from 1.62 in 2019 to 2.50 in 2023, indicating that the company has a sufficient amount of cash on hand to cover its short-term liabilities.
Overall, the trend of increasing liquidity ratios for FormFactor Inc suggests that the company has a strong liquidity position and is well-positioned to meet its short-term financial obligations.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 83.20 | 75.48 | 87.91 | 81.38 | 92.69 |
The cash conversion cycle of FormFactor Inc has varied over the past five years. In 2023, the company's cash conversion cycle was 83.20 days, representing a slight increase compared to the previous year (75.48 days in 2022). The trend over the five-year period shows fluctuations in the cash conversion cycle, with periods of both increase and decrease.
Overall, the cash conversion cycle indicates the number of days it takes for the company to convert its investments in inventory into cash from sales. A lower cash conversion cycle is generally preferred as it signifies that the company is efficiently managing its working capital by rapidly converting inventory into sales and ultimately into cash.
In the case of FormFactor Inc, the trend in the cash conversion cycle indicates some fluctuations in their working capital management efficiency over the years, but the company has shown a moderate level of ability to convert its inventory into cash. It is essential for the company to continue monitoring and improving its working capital management practices to optimize its cash conversion cycle and enhance its overall financial performance.