NetApp Inc (NTAP)

NetApp Inc's liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has decreased from 1.74 in 2021 to 1.19 in 2024. This indicates a potential weakening in NetApp's short-term liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. NetApp's quick ratio has shown a similar decline, dropping from 1.61 in 2021 to 1.04 in 2024. This suggests that the company may have fewer liquid assets available to cover its current obligations without relying on inventory.

The cash ratio, which is the most conservative liquidity ratio as it only includes cash and cash equivalents, has also shown a downward trend over the years. NetApp's cash ratio decreased from 1.33 in 2021 to 0.79 in 2024. A decreasing cash ratio may indicate a reduced ability to meet short-term obligations using only cash resources.

Overall, the decreasing trend in NetApp Inc's liquidity ratios, specifically the current ratio, quick ratio, and cash ratio, signals a potential deterioration in the company's short-term financial health. It is essential for stakeholders to closely monitor these ratios to assess NetApp's ability to meet its short-term obligations as they come due.

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Additional liquidity measure

NetApp Inc's cash conversion cycle has exhibited fluctuations over the last five years. The cash conversion cycle measures the number of days it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower cash conversion cycle indicates more efficient management of working capital.

In the most recent fiscal year ending on April 26, 2024, NetApp Inc's cash conversion cycle improved to 31.02 days, showing a more efficient cash conversion process compared to the preceding year. This suggests that the company was able to manage its inventory, accounts receivable, and accounts payable effectively, leading to a quicker conversion of its investments into cash.

However, in the fiscal year ending on April 24, 2020, the cash conversion cycle was at its highest at 39.66 days. This prolonged cash conversion cycle could indicate inefficiencies in managing working capital or delays in converting resources into cash inflows.

Overall, it is essential for NetApp Inc to continuously monitor and enhance its cash conversion cycle to ensure optimal management of its working capital and efficient cash flow operations.