Power Integrations Inc (POWI)

Power Integrations Inc's liquidity ratios have shown consistency and strength over the past five years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has remained consistently high, ranging from 8.99 to 10.47. This indicates that Power Integrations has a comfortable buffer of current assets to meet its current liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also been robust, ranging from 5.91 to 7.91. This signifies that the company can cover its short-term liabilities even if inventory cannot be quickly converted into cash.

Furthermore, the cash ratio, which is the most conservative liquidity metric as it only considers cash and cash equivalents in relation to current liabilities, has also remained strong, ranging from 5.42 to 7.33. This suggests that Power Integrations holds sufficient cash reserves to settle its current obligations.

Overall, Power Integrations Inc's liquidity ratios demonstrate a healthy financial position with ample liquidity to meet its short-term financial commitments consistently over the years.

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Additional liquidity measure

The cash conversion cycle of Power Integrations Inc has shown fluctuations over the past five years. In December 2020, the cash conversion cycle stood at 128.51 days, indicating that it took the company an average of 128.51 days to convert its investments in inventory and accounts receivable into cash. The cycle decreased significantly to 80.65 days by December 2021, suggesting improved efficiency in managing working capital.

However, in December 2022, the cash conversion cycle increased to 146.94 days, reflecting a lengthened period required for the company to convert its investments into cash. This trend continued in December 2023, with the cycle further extending to 243.62 days, indicating potential liquidity challenges or delays in the cash conversion process.

By December 2024, the cash conversion cycle reached 278.92 days, signifying a substantial increase in the time it takes for Power Integrations Inc to complete the cash conversion cycle. This prolonged cycle may indicate issues with inventory management, slow collections on accounts receivable, or extended payment periods to suppliers.

Overall, Power Integrations Inc should closely monitor its cash conversion cycle and work towards optimizing working capital efficiency to ensure smoother cash flow operations and enhance overall financial performance.