Harmonic Inc (HLIT)

Harmonic Inc's liquidity ratios indicate the company's ability to meet its short-term financial obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- Over the years, Harmonic's current ratio decreased from 1.62 in 2020 to 1.44 in 2021, indicating a slight weakening in its short-term liquidity position.
- The ratio further declined to 1.08 in 2022 but improved to 1.21 in 2023 and significantly increased to 2.18 in 2024.
- A current ratio above 1 implies that the company has more current assets than current liabilities, suggesting a good short-term liquidity position.

2. Quick Ratio:
- The quick ratio assesses the company's ability to meet short-term obligations without relying on the sale of inventory.
- Harmonic's quick ratio also experienced a decreasing trend from 0.67 in 2020 to 0.59 in 2021 and dropped to 0.28 in 2022.
- The ratio improved slightly to 0.31 in 2023 and increased significantly to 0.61 in 2024.
- A quick ratio above 1 is generally preferred, as it indicates that the company can cover its short-term liabilities without relying on inventory sales.

3. Cash Ratio:
- The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents.
- Harmonic's cash ratio showed a similar trend to the quick ratio, decreasing from 0.67 in 2020 to 0.59 in 2021 and dropping to 0.28 in 2022.
- The ratio improved to 0.31 in 2023 and saw a significant increase to 0.61 in 2024.
- A higher cash ratio is typically favored, as it indicates a stronger ability to meet short-term obligations with readily available cash.

In conclusion, while Harmonic Inc experienced fluctuations in its liquidity ratios over the years, the company's liquidity position improved notably in 2024, especially in terms of the current ratio, quick ratio, and cash ratio, suggesting better short-term financial strength and ability to meet obligations without relying heavily on inventory sales.

---

Additional liquidity measure

The cash conversion cycle of Harmonic Inc has shown fluctuating trends over the past five years. In December 2020, the company's cash conversion cycle was 69.55 days, indicating that it took the company approximately 69.55 days to convert its investments in inventory and accounts receivable into cash.

However, by the end of December 2021, the cash conversion cycle increased significantly to 105.03 days, suggesting that the company took longer to convert its assets into cash. This may signify issues with inventory management or collection of receivables.

In December 2022, the cash conversion cycle further increased to 142.83 days, reaching its peak over the five-year period. A prolonged cash conversion cycle can strain a company's liquidity and working capital management, potentially leading to cash flow challenges.

The trend reversed in December 2023 when the cash conversion cycle decreased to 103.78 days, indicating an improvement in the company's efficiency in managing its working capital and converting assets into cash.

By the end of December 2024, the cash conversion cycle decreased further to 74.68 days, approaching levels seen in 2020. This improvement suggests that Harmonic Inc managed to streamline its operations and enhance its cash conversion efficiency, potentially leading to better working capital management.

Overall, fluctuations in the cash conversion cycle of Harmonic Inc reflect changes in the company's operational efficiency, working capital management, and liquidity position over the five-year period. Monitoring and analyzing this metric can provide valuable insights into the company's financial health and effectiveness in converting investments into cash.