MACOM Technology Solutions Holdings Inc (MTSI)

MACOM Technology Solutions Holdings Inc has demonstrated consistently strong liquidity positions over the past five years, as reflected in its current, quick, and cash ratios.

The current ratio, which indicates the company's ability to cover short-term liabilities with its current assets, has shown a positive trend, increasing from 5.07 in 2020 to 8.35 in 2024. This suggests that the company has more than enough current assets to meet its near-term obligations, providing a cushion of safety for creditors and investors.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. MACOM Technology Solutions Holdings Inc's quick ratio has followed a similar upward trend, rising from 3.99 in 2020 to 6.36 in 2024. This implies that the company has a strong ability to meet its short-term commitments without relying on inventory sales.

Moreover, the cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, has also shown improvement over the period. The cash ratio increased from 3.51 in 2020 to 5.38 in 2024, indicating that MACOM Technology Solutions Holdings Inc has a healthy level of cash reserves to cover immediate liabilities.

Overall, the liquidity ratios of MACOM Technology Solutions Holdings Inc reflect a robust financial position with ample resources to meet its short-term obligations and operational needs. This indicates the company's ability to navigate unforeseen challenges and take advantage of potential growth opportunities.

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Additional liquidity measure

The cash conversion cycle, which reflects how efficiently a company manages its working capital, has shown an increasing trend for MACOM Technology Solutions Holdings Inc over the past five years.

In Sep 30, 2024, the cash conversion cycle increased to 217.32 days, indicating that the company takes longer to convert its investments in inventory into cash from sales. This may suggest potential inefficiencies in inventory management and collection of receivables, leading to a longer operating cycle.

Comparing this to the previous year, Sep 30, 2023, when the cash conversion cycle was 206.11 days, the company has experienced a further elongation in the cycle, which is a concerning trend for liquidity management.

Looking back to Sep 30, 2022, the cash conversion cycle was 169.19 days, reflecting a notable increase from the prior year. The company took longer to convert its resources into cash during this period.

In Sep 30, 2021, the cash conversion cycle was 125.20 days, which was a relatively lower value compared to the subsequent years. However, this figure has been on the rise since then.

In Sep 30, 2020, the cash conversion cycle was at 127.87 days, indicating a slight improvement from the previous year. However, this figure has since deteriorated, as seen in the subsequent years.

Overall, the increasing trend in the cash conversion cycle for MACOM Technology Solutions Holdings Inc suggests potential inefficiencies in working capital management, such as slow inventory turnover and collection processes. The company may need to focus on optimizing its inventory levels and improving accounts receivable collection to shorten its cash conversion cycle and enhance its overall liquidity position.