IPG Photonics Corporation (IPGP)

IPG Photonics Corporation's liquidity ratios have shown some fluctuations over the years based on the provided data.

1. Current Ratio:
- The company's current ratio, which measures its ability to cover short-term liabilities with current assets, decreased from 10.01 in 2020 to 7.49 in 2021, indicating a potential decrease in liquidity.
- The ratio continued to decrease to 7.23 in 2022 before experiencing an improvement to 8.91 in 2023, suggesting better short-term liquidity. However, it dropped again to 6.98 in 2024, which may raise concerns about the company's ability to meet current obligations.

2. Quick Ratio:
- The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, followed a similar trend to the current ratio.
- It decreased from 6.48 in 2020 to 4.83 in 2021, showing a decline in the company's ability to meet short-term obligations without relying on inventory.
- Although there was a slight improvement to 5.48 in 2023, the ratio dropped to 4.54 in 2024, indicating challenges in short-term liquidity management.

3. Cash Ratio:
- The cash ratio, which focuses solely on cash and cash equivalents to cover current liabilities, exhibited a pattern similar to the quick ratio.
- It decreased from 6.48 in 2020 to 4.83 in 2021, aligning with the decrease in overall liquidity.
- The ratio showed a slight improvement to 5.48 in 2023 but dropped back to 4.54 in 2024, indicating fluctuations in the company's cash position and its ability to cover immediate obligations.

In summary, IPG Photonics Corporation's liquidity ratios have shown mixed performance over the years, with periods of improvement and decline. It is important for the company to closely monitor these ratios to ensure sufficient liquidity to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of IPG Photonics Corporation, a key measure of efficiency in managing its working capital, has shown some fluctuation over the past five years.

As of December 31, 2020, the company's cash conversion cycle stood at 201.33 days, indicating that it took IPG Photonics approximately 201 days to convert its investments in inventory and accounts receivable into cash from sales.

Over the following years, there was a slight increase to 219.99 days by December 31, 2021, showing a potential delay in converting working capital into cash. However, the company managed to reduce this cycle to 212.69 days by December 31, 2022, before seeing a rise to 222.15 days by December 31, 2023.

The most notable improvement in efficiency came by December 31, 2024, when the cash conversion cycle decreased significantly to 162.67 days. This reduction suggests that IPG Photonics was able to optimize its management of inventory, accounts receivable, and accounts payable, resulting in a quicker conversion of invested capital into cash inflows.

Overall, while there were fluctuations in the cash conversion cycle over the years, the company's ability to effectively manage its working capital improved noticeably by the end of 2024, enhancing its liquidity position and operational efficiency.