Littelfuse Inc (LFUS)

Looking at Littelfuse Inc's liquidity ratios over the past five years, we can see some fluctuations in their ability to meet short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Littelfuse Inc's current ratio has been decreasing over the years, indicating a potential weakening ability to meet short-term obligations. However, the ratio remained above 1, which generally means the company has enough current assets to cover current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Littelfuse Inc's quick ratio also shows a decreasing trend over the years, indicating a decreasing ability to cover immediate liabilities without relying on selling inventory. However, the quick ratio has remained above 1, suggesting that the company still has an acceptable level of liquidity.

3. Cash Ratio:
- The cash ratio focuses on the company's ability to cover short-term liabilities with cash and cash equivalents only. Littelfuse Inc's cash ratio remains consistent over the years, indicating a stable position in terms of liquidity. The company seems to have sufficient cash on hand to meet immediate obligations.

Overall, while Littelfuse Inc's liquidity ratios have experienced some fluctuations, the company generally maintained a solid liquidity position, reflected in the current ratio staying comfortably above 1 and the cash ratio remaining stable. However, the decreasing trend in quick ratio raises the need for the company to closely monitor its ability to cover short-term obligations without relying on inventory.

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Additional liquidity measure

The cash conversion cycle of Littelfuse Inc has shown variation over the past five years. In 2020, the company's cash conversion cycle was 99.70 days, reflecting the average number of days it took for Littelfuse to convert its investments in inventory and other resources into cash flows from sales. There was a noticeable increase in the cash conversion cycle in 2021, reaching 124.37 days, indicating a potential delay in collecting cash from sales and managing inventory efficiently.

By the end of 2022, the cash conversion cycle further increased to 132.65 days, signaling a prolonged period for the company to recover its investments and generate cash inflows. However, in 2023, there was a slight improvement as the cash conversion cycle decreased to 118.46 days, showing potential efforts in optimizing working capital and operational efficiency.

The most recent data from 2024 reflects a decrease in the cash conversion cycle to 108.28 days, suggesting potential enhancements in managing inventory levels and streamlining the cash flow cycle. Overall, the trend indicates some fluctuations in Littelfuse's cash conversion cycle over the years, underscoring the importance of efficient working capital management in optimizing financial performance and liquidity.