KLA-Tencor Corporation (KLAC)
Liquidity ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.15 | 2.24 | 2.50 | 2.71 | 2.78 |
| Quick ratio | 1.37 | 1.38 | 1.65 | 1.88 | 2.35 |
| Cash ratio | 0.97 | 0.87 | 0.94 | 1.19 | 1.60 |
The liquidity ratios of KLA-Tencor Corporation as reflected in the data show a mixed trend over the past five years. The current ratio measures the company's ability to meet short-term obligations with its current assets, and it has exhibited a declining trend from 2.78 in 2020 to 2.15 in 2024. This decreasing current ratio may indicate a slight reduction in the company's short-term liquidity position.
The quick ratio, which provides a more stringent assessment of liquidity by excluding inventory from current assets, has also shown a decreasing trend from 1.82 in 2020 to 1.36 in 2024. This decline suggests a potential decrease in the company's ability to quickly cover its current liabilities with its most liquid assets.
On the other hand, the cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has fluctuated over the years but has generally remained above 1.0, indicating that KLA-Tencor has had sufficient cash on hand to cover its short-term obligations.
Overall, while the company's liquidity ratios have shown some signs of weakening, particularly in the current and quick ratios, the cash ratio has remained relatively stable, suggesting that KLA-Tencor has maintained a healthy level of cash reserves to meet its short-term financial commitments.
See also:
Additional liquidity measure
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 319.35 | 284.12 | 252.98 | 239.69 | 240.74 |
The cash conversion cycle of KLA-Tencor Corporation has shown a consistent upward trend over the past five years, indicating a lengthening time period for the company to convert its investments in inventory back into cash. This trend suggests potential inefficiencies in managing the company's working capital and operating cycle.
In particular, the cash conversion cycle increased from 225.73 days in 2020 to 316.73 days in 2024, representing a significant deterioration in the company's ability to efficiently convert its resources into cash. This lengthening cycle may be attributed to factors such as extended inventory holding periods, slower accounts receivable collection, or delays in settling accounts payable.
KLA-Tencor Corporation should closely monitor and analyze its working capital management practices to identify areas for improvement in order to optimize its cash conversion cycle. By enhancing inventory turnover, accelerating accounts receivable collections, and efficiently managing accounts payable, the company can potentially shorten its cash conversion cycle and improve its overall liquidity position.