Universal Display (OLED)

Universal Display Corp.'s liquidity position has generally shown strength over the past five years based on the current ratio, quick ratio, and cash ratio. The current ratio, which measures the firm's ability to cover short-term obligations with its current assets, has improved consistently from 4.91 in 2019 to 7.72 in 2023. This indicates that the company has significantly more current assets to meet its short-term liabilities.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also demonstrates improvement over the years, increasing from 4.51 in 2019 to 6.24 in 2023. This indicates that Universal Display Corp. has a strong ability to cover its short-term obligations with its most liquid assets.

Furthermore, the cash ratio, which is the most conservative measure of liquidity and evaluates the company's ability to cover current liabilities with only cash and cash equivalents, has also shown improvement over the period, with an increase from 4.14 in 2019 to 5.06 in 2023. This suggests that the company has a solid cash position relative to its short-term obligations.

Overall, the trend of increasing current, quick, and cash ratios indicates that Universal Display Corp. has enhanced its liquidity position over the years, which may imply better financial stability and the ability to meet its short-term obligations effectively.

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Additional liquidity measure

Universal Display Corp.'s cash conversion cycle has exhibited a fluctuating trend over the past five years. The cycle lengthened in 2023 to 533.05 days from 550.57 days in 2022, reflecting a reversal in the previous increasing pattern. However, it remained higher than both 2021 and 2020 levels, indicating a slower process of converting the company's investments in raw materials and production into cash receipts from customers.

The significant rise in the cash conversion cycle from 2020 to 2021, followed by a moderate increase in 2022, suggests potential inefficiencies in managing inventory, receivables, and payables. Although the cycle decreased in 2019, it marked a substantial increase in the subsequent years, which could signal challenges in working capital management or changes in the company's operating environment.

Overall, Universal Display Corp. should focus on optimizing its cash conversion cycle to enhance liquidity, reduce working capital requirements, and improve overall financial performance. Keeping a close eye on inventory turnover, accounts receivable collection, and accounts payable management will be essential for effectively managing the cash conversion cycle in the future.