InterDigital Inc (IDCC)

InterDigital Inc's liquidity ratios provide insights into the company's ability to meet its short-term obligations with its current assets.

1. Current Ratio: This ratio indicates the company's ability to cover its short-term liabilities with its current assets. InterDigital's current ratio fluctuated over the years, starting at a healthy 3.39 in 2020, decreasing to 1.33 in 2023, and then slightly improving to 1.70 in 2024. A ratio above 1 suggests the company can meet its current obligations, although a higher ratio is generally preferred for financial health.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. InterDigital's quick ratio followed a similar trend to the current ratio, showing a decrease from 3.37 in 2020 to 1.30 in 2023, before rising to 1.60 in 2024. A quick ratio above 1 indicates a company can cover its short-term obligations without relying on selling inventory.

3. Cash Ratio: The cash ratio measures the extent to which a company can cover its short-term liabilities with its cash and cash equivalents. InterDigital's cash ratio showed a declining trend from 3.13 in 2020 to 1.14 in 2023 before slightly increasing to 1.32 in 2024. While a cash ratio above 1 suggests the company has sufficient cash to cover its short-term debt, a decreasing trend may signal a potential liquidity concern.

Overall, while InterDigital's liquidity ratios demonstrate the company's ability to meet its short-term obligations, the decreasing trends over the years raise concerns about its liquidity management. It is essential for the company to closely monitor and manage its liquidity position to ensure financial stability and meet its obligations efficiently.

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Additional liquidity measure

The cash conversion cycle of InterDigital Inc has shown fluctuations over the past five years. In 2020, the company had a relatively efficient cash conversion cycle of 77.10 days, indicating that it was able to convert its investments in inventory and accounts receivable back into cash within a short period.

However, in 2021, the cash conversion cycle significantly increased to 343.99 days, which suggests that InterDigital Inc took a longer time to convert its investments into cash during that year. This could be due to issues such as increased inventory levels or slower collections on accounts receivable.

The following year, in 2022, the cash conversion cycle decreased to 105.33 days, showing an improvement in the company's ability to manage its working capital more effectively. This improvement may have resulted from better inventory management or faster collection on receivables.

In 2023, the cash conversion cycle increased again to 201.19 days, indicating a longer time taken by InterDigital Inc to convert its investments into cash compared to the previous year. This could be a result of changing market conditions or operational challenges.

Finally, in 2024, the cash conversion cycle improved to 85.87 days, signaling a return to a more efficient working capital management by the company. This improvement could be attributed to strategic initiatives undertaken by InterDigital Inc to optimize its cash conversion processes.

Overall, the fluctuation in the cash conversion cycle of InterDigital Inc over the five-year period highlights the importance of monitoring working capital efficiency and implementing effective strategies to optimize cash flow management.