First Solar Inc (FSLR)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.45 | 3.55 | 3.65 | 4.39 | 3.56 |
| Quick ratio | 1.67 | 2.64 | 2.80 | 3.10 | 2.41 |
| Cash ratio | 0.86 | 1.61 | 2.48 | 2.51 | 2.06 |
First Solar Inc's liquidity ratios have shown a generally positive trend over the past five years.
1. Current Ratio: The current ratio measures the company's ability to cover its short-term obligations with its current assets. First Solar's current ratio has fluctuated but generally improved from 3.56 in 2020 to 4.39 in 2021, before declining slightly to 3.55 in 2023 and 2.45 in 2024. The ratio above 1 indicates that the company can meet its short-term debt obligations.
2. Quick Ratio: The quick ratio provides a more conservative measure of liquidity as it excludes inventory from current assets. First Solar's quick ratio has also shown improvement over the years, increasing from 2.41 in 2020 to 3.10 in 2021, before decreasing to 1.67 in 2024. This indicates the firm's ability to meet short-term liabilities without relying on the sale of inventory.
3. Cash Ratio: The cash ratio is the most conservative measure of liquidity, focusing solely on cash and cash equivalents to cover short-term liabilities. First Solar's cash ratio has varied, ranging from 0.86 in 2024 to 2.51 in 2021. This ratio indicates how well the company can meet its short-term obligations using only its cash reserves.
Overall, while the current and quick ratios indicate a healthy liquidity position for First Solar Inc, there has been some slight degradation in the ratios in 2024. Monitoring these ratios will be essential to ensure the company can continue to meet its short-term financial obligations effectively.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 239.95 | 258.47 | 85.28 | 132.32 | 108.48 |
The cash conversion cycle for First Solar Inc has shown fluctuations over the years based on the provided data. It was at its lowest in December 31, 2022, at 85.28 days, indicating the company was efficiently managing its cash flows, inventory, and receivables during that period.
However, there was a significant increase in the cash conversion cycle in the following years, particularly in December 31, 2023, and December 31, 2024, reaching 258.47 days and 239.95 days, respectively. This suggests a potential slowdown in the conversion of inventory and receivables into cash, which may indicate issues with managing working capital effectively or facing challenges in sales collection or production efficiency.
Overall, the trend in the cash conversion cycle for First Solar Inc demonstrates the importance of closely monitoring and managing working capital components to maintain healthy cash flows and operational efficiency. It would be beneficial for the company to analyze the underlying factors contributing to these fluctuations and implement strategies to improve working capital management in order to optimize cash conversion processes and overall financial performance.