ON Semiconductor Corporation (ON)

Based on the provided data, let's analyze the liquidity ratios of ON Semiconductor Corporation:

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets. ON Semiconductor's current ratio has shown a fluctuating trend over the years, ranging from a low of 1.84 in March 2021 to a high of 5.06 in December 2024. It is generally considered healthy for a company to have a current ratio above 1, indicating that ON Semiconductor has had more than enough current assets to cover its short-term obligations throughout the period.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. ON Semiconductor's quick ratio has also exhibited variability, with values ranging from 1.00 in March 2021 to 3.11 in December 2024. A quick ratio greater than 1 indicates that the company can meet its short-term liabilities without relying on the sale of inventory, which is a positive sign for ON Semiconductor's liquidity position.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, as it only considers the most liquid assets - cash and cash equivalents - to cover short-term liabilities. ON Semiconductor's cash ratio has generally increased over the years, reflecting a strengthening liquidity position. With values ranging from 0.60 in March 2021 to 2.24 in December 2024, the company has consistently maintained a healthy level of cash reserves relative to its short-term obligations.

In conclusion, ON Semiconductor Corporation has demonstrated a strong liquidity position based on its current, quick, and cash ratios over the analyzed period. The company's ability to meet its short-term liabilities with ease and maintain a comfortable buffer of liquid assets suggests a sound financial footing and effective management of liquidity risks.

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See also:

ON Semiconductor Corporation Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The cash conversion cycle of ON Semiconductor Corporation has shown fluctuations over the past several quarters. Starting from 120.98 days as of March 31, 2020, the cycle increased to 128.76 days by September 30, 2020, before decreasing to 108.17 days by June 30, 2021. The cycle then rose to 115.63 days by March 31, 2022, before experiencing a significant jump to 163.77 days by March 31, 2024.

It is important to note that a longer cash conversion cycle indicates that the company is taking longer to convert its investments in inventory and accounts receivable back into cash. This could potentially signal inefficiencies in managing working capital or challenges in the company's operations or customer payment terms. Conversely, a shorter cash conversion cycle could indicate effective management of working capital and efficient operations.

However, the cash conversion cycle of ON Semiconductor Corporation has been increasing consistently since March 31, 2022, reaching 217.21 days by December 31, 2024. This prolonged cycle may raise concerns about the company's liquidity, working capital management, and overall operational efficiency. It may be necessary for the company to closely monitor and address the factors contributing to this trend to ensure sustainable financial health in the future.