Littelfuse Inc (LFUS)

The liquidity ratios of Littelfuse Inc demonstrate varying levels of liquidity and ability to meet short-term obligations over the past five years.

- The current ratio, which measures the company's ability to cover short-term obligations with its current assets, has shown some fluctuations. It increased from 2.64 in 2022 to 3.75 in 2023, indicating an improvement in the company's short-term liquidity position.

- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. Littelfuse Inc's quick ratio has also shown some variability over the past five years, with a notable increase from 1.52 in 2022 to 2.24 in 2023. This indicates an enhancement in the company's ability to meet its short-term obligations using its most liquid assets.

- The cash ratio, which is the most conservative liquidity ratio as it considers only cash and cash equivalents in relation to current liabilities, has also displayed fluctuations. Littelfuse Inc's cash ratio increased from 0.98 in 2022 to 1.48 in 2023, reflecting an improvement in the company's immediate ability to cover its short-term liabilities solely from its cash holdings.

Overall, Littelfuse Inc's liquidity ratios have shown some volatility but have generally improved or remained at healthy levels over the past five years, suggesting that the company has maintained a strong liquidity position and is capable of meeting its short-term obligations efficiently.

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Additional liquidity measure

The cash conversion cycle of Littelfuse Inc has shown a fluctuating trend over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and accounts receivable into cash flow from sales.

In 2023, the cash conversion cycle was 103.20 days, showing a slight improvement compared to the previous year. However, it remains higher than the levels seen in 2020 and 2019. This could indicate that the company may be facing challenges in efficiently managing its inventory and accounts receivable.

Between 2020 and 2022, the cash conversion cycle increased steadily, reaching its peak in 2022 at 109.98 days. This suggests that Littelfuse Inc may have been experiencing delays in collecting receivables or managing inventory levels effectively during this period.

On the positive side, the company was able to reduce the cash conversion cycle in 2021, indicating potential improvements in working capital management practices. However, this improvement was not sustained in the following years.

Overall, Littelfuse Inc should continue to focus on optimizing its cash conversion cycle to ensure better liquidity and operational efficiency. Strategies to streamline inventory management, expedite accounts receivable collections, and negotiate favorable payment terms with suppliers could help in reducing the cycle duration.