Microchip Technology Inc (MCHP)
Liquidity ratios
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | |
|---|---|---|---|---|---|
| Current ratio | 2.59 | 1.20 | 0.98 | 1.75 | 0.89 |
| Quick ratio | 1.27 | 0.83 | 0.49 | 0.99 | 0.53 |
| Cash ratio | 0.67 | 0.38 | 0.08 | 0.23 | 0.12 |
Microchip Technology Inc's liquidity ratios provide insights into its ability to meet short-term obligations and manage cash efficiently.
1. Current Ratio: This ratio indicates the company's ability to cover its short-term liabilities with its current assets. Microchip's current ratio has fluctuated over the years, starting at a low of 0.89 in 2021, increasing to 2.59 in 2025. While the current ratio improved significantly in 2022 and 2025, it dipped below 1 in 2021 and 2023, suggesting potential liquidity challenges in those years.
2. Quick Ratio: The quick ratio measures the company's ability to meet short-term obligations with its most liquid assets excluding inventory. Microchip's quick ratio also shows variability, ranging from 0.49 in 2023 to 1.27 in 2025. The company's quick assets improved over the years, indicating better short-term liquidity management.
3. Cash Ratio: This ratio focuses solely on the firm's ability to cover current liabilities with its cash and cash equivalents. Microchip's cash ratio has shown an increasing trend from 0.08 in 2023 to 0.67 in 2025, indicating a stronger ability to meet short-term obligations using cash reserves.
Overall, Microchip Technology Inc's liquidity ratios have shown improvement over the years, with the company demonstrating better capacity to meet its short-term obligations and manage cash effectively. It is essential for stakeholders to monitor these ratios to assess the company's liquidity position continually.
See also:
Additional liquidity measure
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 271.04 | 207.25 | 180.04 | 135.85 | 132.99 |
The cash conversion cycle of Microchip Technology Inc has exhibited a concerning trend over the past five years. Starting at 132.99 days on March 31, 2021, the cycle has progressively lengthened to 135.85 days in 2022, 180.04 days in 2023, 207.25 days in 2024, and finally peaking at 271.04 days by March 31, 2025. This indicates that the company is taking longer to convert its investments in inventory into cash receipts from sales, which may be a sign of inefficiencies in its operations or potential issues with managing its working capital effectively. The notable increase in the cash conversion cycle suggests a need for Microchip Technology Inc to focus on streamlining its inventory management, improving its accounts receivable collection process, and optimizing its accounts payable terms to enhance its overall liquidity position and operational efficiency.