Gentex Corporation (GNTX)

Gentex Corporation's liquidity ratios provide insights into its ability to meet short-term obligations and operating needs.

1. Current Ratio: This ratio indicates the company's ability to cover current liabilities with current assets. Gentex's current ratio has gradually decreased from 5.51 in 2020 to 4.11 in 2024. While the current ratio remains above 1, suggesting the company can meet its short-term obligations, the decreasing trend may indicate a potential liquidity risk over time.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, measures the company's ability to pay off current liabilities without relying on the sale of inventory. Gentex Corporation's quick ratio has also shown a decreasing trend, falling from 4.14 in 2020 to 2.18 in 2024. This might signal a reduction in the company's ability to meet its short-term obligations using its most liquid assets.

3. Cash Ratio: The cash ratio is the most stringent liquidity ratio, focusing on the company's ability to cover current liabilities with cash and cash equivalents only. Gentex's cash ratio has dropped significantly from 2.53 in 2020 to 1.01 in 2024. This decreasing trend indicates a potential strain on the company's cash resources to meet immediate payment obligations.

Overall, while Gentex Corporation's liquidity ratios suggest that the company can meet its short-term obligations, the declining trend in these ratios over the years warrants a closer monitoring of the company's liquidity position to mitigate any potential liquidity challenges in the future.

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Additional liquidity measure

The cash conversion cycle for Gentex Corporation has shown some fluctuation over the past five years. In December 2020, the company's cash conversion cycle stood at 104.82 days, indicating the average number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

By December 2021, this cycle increased to 117.56 days, suggesting a lengthening time period for Gentex to convert its resources into cash. The trend continued in 2022, with the cycle slightly declining to 116.74 days, but still remaining at elevated levels compared to previous years.

In December 2023, the cash conversion cycle saw a significant improvement, dropping to 98.78 days. This reduction implies that Gentex Corporation was able to more efficiently manage its inventory, payables, and receivables during this period.

However, in December 2024, the cycle increased slightly to 104.52 days, indicating a moderate reversal in the company's cash conversion efficiency compared to the previous year.

Overall, Gentex Corporation has experienced variability in its cash conversion cycle over the last five years, with improvements in some years and slight setbacks in others. Further analysis and scrutiny may be required to understand the factors driving these fluctuations and to identify areas for potential operational and financial optimization.