FormFactor Inc (FORM)

FormFactor Inc has demonstrated strong liquidity positions over the years, as indicated by its current ratio, quick ratio, and cash ratio.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has consistently been above 3.0 in recent years. This indicates that FormFactor Inc has more than enough current assets to meet its short-term obligations, providing a comfortable cushion for unexpected expenses or downturns in business.

Similarly, the quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. FormFactor Inc's quick ratio has also shown a healthy trend, with values consistently above 1.5. This suggests that the company has a strong ability to meet its short-term obligations without relying on selling off inventory.

The cash ratio, which focuses solely on the most liquid assets (cash and cash equivalents) compared to current liabilities, has exhibited a similar positive trajectory. FormFactor Inc's cash ratio has been above 1.5, indicating that the company holds sufficient cash to cover its immediate liabilities.

Overall, the liquidity ratios of FormFactor Inc reflect a robust financial position with ample liquidity to support its operations and withstand potential financial challenges.

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Additional liquidity measure

FormFactor Inc's cash conversion cycle has shown fluctuations over the years based on the provided data. Starting at 89.28 days in December 31, 2020, it increased slightly to 91.10 days by December 31, 2021. The trend continued with a more significant rise to 99.47 days by December 31, 2022, and further increased to 100.77 days by December 31, 2023. However, there was a notable improvement as the cash conversion cycle decreased to 81.44 days by December 31, 2024.

Overall, the cash conversion cycle indicates the time it takes for FormFactor Inc to convert its investments in inventory and other resources into cash flows from sales. An increasing cash conversion cycle may suggest inefficiencies in managing inventory, collecting receivables, or paying liabilities. On the other hand, a decreasing cycle could indicate better working capital management and efficiency in the company's operations. Investors and stakeholders would closely monitor these trends to assess the company's liquidity and operational effectiveness.