Proto Labs Inc (PRLB)

Proto Labs Inc's liquidity ratios indicate its ability to meet short-term obligations and manage its current liabilities.

1. Current Ratio: It measures the company's ability to cover its short-term obligations with its current assets. From 2020 to 2024, Proto Labs Inc's current ratio decreased from 4.82 to 3.66. While the current ratio generally decreased over the years, it remained above 1, indicating that the company has more than enough current assets to cover its current liabilities.

2. Quick Ratio: This ratio provides a more conservative measure of liquidity as it excludes inventory from current assets. Proto Labs Inc's quick ratio decreased from 3.22 in 2020 to 1.94 in 2024. This decrease may be due to a lower proportion of liquid assets relative to current liabilities. However, the quick ratio remained above 1, suggesting the company can still meet its short-term obligations without relying heavily on inventory.

3. Cash Ratio: The cash ratio measures a company's ability to pay off its current liabilities with its cash and cash equivalents alone. Proto Labs Inc's cash ratio followed a similar trend to the quick ratio, decreasing from 3.22 in 2020 to 1.94 in 2024. This indicates the company's ability to cover its short-term obligations solely with cash and cash equivalents declined slightly over the years.

Overall, while Proto Labs Inc's liquidity ratios have shown a slight decline over the years, they indicate that the company is still in a strong position to meet its short-term obligations and manage its current liabilities effectively.

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Additional liquidity measure

Proto Labs Inc's cash conversion cycle has shown a consistent trend of improvement over the five-year period from December 31, 2020, to December 31, 2024. The company's cash conversion cycle decreased from 18.31 days in 2020 to 16.17 days in 2024. This indicates that the company has become more efficient in managing its working capital and converting its resources into cash.

A lower cash conversion cycle suggests that Proto Labs Inc is taking less time to convert its investments in inventory into cash from sales, which is a positive indication of operational efficiency and liquidity management. The decreasing trend in the cash conversion cycle implies that the company has been able to streamline its production and sales processes, leading to quicker cash flows and potentially improved profitability.

Overall, Proto Labs Inc's improving cash conversion cycle reflects effective working capital management and operational efficiency, which can contribute to the company's financial performance and sustainability.