Novanta Inc (NOVT)

Novanta Inc's liquidity ratios have shown fluctuations over the past five years. The current ratio, which measures the company's ability to cover its short-term obligations with current assets, has generally been healthy, increasing from 2.26 in 2019 to 2.98 in 2023. This indicates that Novanta has a strong ability to meet its current liabilities using its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. Novanta's quick ratio has also followed an upward trend, from 1.39 in 2019 to 1.91 in 2023, indicating an improvement in the company's ability to meet its short-term obligations without relying on inventory.

The cash ratio, which represents the proportion of a company's current assets held in cash or cash equivalents relative to its current liabilities, has been more volatile for Novanta. It peaked at 1.17 in 2020 but has since declined to 0.85 in 2023. Despite this recent decrease, the cash ratio still suggests that Novanta has a sufficient level of cash to cover its immediate liabilities.

In conclusion, Novanta's liquidity ratios have shown overall improvement, with the current and quick ratios demonstrating a strong ability to meet short-term obligations. However, the company should keep an eye on its cash ratio to ensure it maintains an adequate level of liquid assets to support its financial stability.

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Additional liquidity measure

The cash conversion cycle of Novanta Inc has exhibited fluctuations over the past five years. In 2023, the cash conversion cycle increased to 130.91 days from 129.21 days in 2022. This indicates that it took Novanta slightly longer to convert its investments in inventory and accounts receivable into cash during the most recent year.

Comparing the cycle in 2023 to that in 2021, we see a more considerable increase from 112.05 days to 130.91 days. This suggests a notable extension in the time taken by Novanta to complete its operating cycle and recover cash from its sales, inventory, and receivables.

In contrast, the cash conversion cycle in 2020 was lower at 100.85 days compared to 2019's cycle of 120.75 days. This indicates that Novanta was more efficient in managing its working capital and converting its resources into cash in 2020.

Overall, the cash conversion cycle of Novanta Inc has shown variability over the years, with fluctuations indicating changes in the company's efficiency in managing its working capital and liquidity. Further analysis of the underlying factors affecting this metric could provide insights into the company's operational effectiveness and financial performance.