Monolithic Power Systems Inc (MPWR)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 5.31 | 7.74 | 5.36 | 4.96 | 5.73 |
| Quick ratio | 3.72 | 5.69 | 3.53 | 3.68 | 4.52 |
| Cash ratio | 2.93 | 4.72 | 2.80 | 3.19 | 4.05 |
Monolithic Power Systems Inc's liquidity ratios have shown relatively strong performance over the years.
The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has consistently remained above 4, indicating a comfortable liquidity position. It decreased slightly from 5.73 in 2020 to 4.96 in 2021 but then improved steadily to reach 5.31 in 2024, signaling that the company has maintained a sufficient level of current assets to meet its short-term obligations.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also reflects the company's ability to cover its short-term liabilities without relying on inventory turnover. Although there was a decrease from 4.52 in 2020 to 3.68 in 2021, the quick ratio recovered and showed a positive trend, reaching 3.72 in 2024.
The cash ratio, which provides insight into the company's ability to cover its current liabilities with its cash and cash equivalents, has shown fluctuations but generally remained above 2. This indicates that Monolithic Power Systems Inc has a sufficient amount of cash to meet its immediate obligations, with the ratio peaking at 4.72 in 2023.
Overall, the liquidity ratios suggest that Monolithic Power Systems Inc has maintained a strong liquidity position, with adequate short-term assets to cover its short-term liabilities consistently over the years.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 155.80 | 192.42 | 227.83 | 156.57 | 144.37 |
The cash conversion cycle for Monolithic Power Systems Inc has shown fluctuations over the past five years. Starting at 144.37 days on December 31, 2020, the cycle increased to 156.57 days on December 31, 2021, indicating a potential slowdown in the conversion of raw materials to cash. The cycle then experienced a significant surge to 227.83 days by December 31, 2022, suggesting challenges in managing inventory, receivables, and payables efficiently.
Despite the spike, there was a slight improvement in efficiency by December 31, 2023, with the cycle decreasing to 192.42 days. This may indicate strategic efforts to streamline operations and enhance cash flow. By December 31, 2024, the cycle further decreased to 155.80 days, potentially reflecting continued focus on optimizing working capital management.
Overall, Monolithic Power Systems Inc's cash conversion cycle has displayed variability, with a notable peak in 2022 followed by improvements in subsequent years. Continued attention to inventory turnover, accounts receivable collection, and accounts payable management will be crucial for the company to sustain optimal cash conversion efficiency in the future.