Mesa Laboratories Inc (MLAB)

Mesa Laboratories Inc's liquidity ratios indicate the company's ability to meet its short-term obligations with its current assets. The current ratio has shown a declining trend over the past five years, from 9.32 in 2021 to 2.47 in 2024. Although the current ratio has decreased, it still remains above 1, suggesting that Mesa Laboratories Inc has sufficient current assets to cover its current liabilities.

The quick ratio, a more stringent measure of liquidity, also decreased over the years from 8.83 in 2021 to 1.52 in 2024. This indicates that the company may have had a lower level of inventory and prepaid expenses relative to its current liabilities in 2024 compared to 2021. Nonetheless, the quick ratio above 1 implies that Mesa Laboratories Inc can still meet its short-term obligations using its most liquid assets.

The cash ratio, which provides the most conservative measure of liquidity, has followed a similar downward trend from 8.10 in 2021 to 0.64 in 2024. This indicates that Mesa Laboratories Inc may have had relatively lower cash reserves compared to its current liabilities in 2024. However, a cash ratio above 0.5 generally suggests that the company has some capacity to cover its short-term obligations with cash on hand.

Overall, while the declining trend in liquidity ratios may raise some concerns, Mesa Laboratories Inc's current, quick, and cash ratios are still at levels that indicate a reasonable ability to meet its short-term financial obligations. As always, it is essential for the company to monitor these ratios closely to ensure liquidity remains adequate to support its operations.

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Additional liquidity measure

The cash conversion cycle of Mesa Laboratories Inc has fluctuated over the past five years, ranging from 116.98 days to 192.75 days. The company's cash conversion cycle indicates the number of days it takes to convert its investments in raw materials and other resources into cash inflows from sales.

In the most recent year ending March 31, 2024, Mesa Laboratories Inc had a cash conversion cycle of 183.15 days, which represents a slight decrease from the previous year. This indicates that the company took longer to convert its resources into cash compared to the prior year.

Analyzing further, the increase in the cash conversion cycle from 2022 to 2023 suggests a potential inefficiency in managing the company's working capital. Conversely, the decrease in the cash conversion cycle from 2021 to 2022 indicates an improvement in the efficiency of Mesa Laboratories Inc's cash management.

Overall, Mesa Laboratories Inc should closely monitor and manage its cash conversion cycle to ensure efficient utilization of its resources and optimize its working capital management.