Smart Global Holdings Inc (SGH)

SMART Global Holdings Inc's liquidity ratios provide valuable insights into the company's ability to meet its short-term obligations.

The current ratio has been relatively stable over the past five years, ranging from 1.63 to 2.23. This ratio indicates that the company has sufficient current assets to cover its current liabilities. The current ratio peaked in 2022, reflecting a stronger ability to meet short-term obligations, and has remained above 2 for the past two years, indicating a healthy liquidity position.

The quick ratio, which excludes inventory from current assets, has also shown a favorable trend, ranging from 1.01 to 1.61 over the last five years. This ratio provides a more stringent measure of liquidity, and SMART Global Holdings Inc has consistently maintained a strong quick ratio, indicating the company's ability to meet short-term obligations without relying on selling inventory.

The cash ratio, which only considers cash and cash equivalents in relation to current liabilities, has demonstrated an increasing trend, reaching 1.04 in 2023 from 0.47 in 2021. This improvement indicates that SMART Global Holdings Inc has enhanced its ability to cover short-term liabilities using its readily available cash resources.

Overall, based on these liquidity ratios, SMART Global Holdings Inc appears to have a solid liquidity position, with sufficient current assets and cash to cover its short-term obligations. The trend of these ratios suggests that the company has managed its liquidity effectively over the years, providing confidence in its ability to meet near-term financial obligations.

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Additional liquidity measure

The cash conversion cycle (CCC) is a crucial metric that measures the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower CCC generally indicates a more efficient use of working capital and better liquidity management. Here's a detailed analysis of SMART Global Holdings Inc's cash conversion cycle based on the provided data:

Aug 25, 2023: The company's cash conversion cycle stood at 69.75 days, indicating that it took approximately 69.75 days to convert its investments in inventory and other resources into cash flows from sales. This represents a slight improvement compared to the previous year.

Aug 26, 2022: In the previous year, the CCC was 76.45 days, which suggests that the company took longer to convert its resources into cash compared to the current year. This indicates an improvement in working capital management and liquidity efficiency.

Aug 27, 2021: The CCC was 55.99 days, showing a decrease from the prior year. This reflects a shorter cash conversion cycle, signaling improved efficiency in working capital management and a more streamlined process for converting investments into cash flows.

Aug 28, 2020: The cash conversion cycle was 45.78 days, indicating a further reduction from the prior year. This suggests that the company was more efficient in converting its investments into cash flows from sales.

Aug 30, 2019: The CCC stood at 52.03 days, showing a slight increase compared to the previous year. Despite the increase, the company's cash conversion cycle remained relatively low, indicating efficient utilization of working capital.

Overall, SMART Global Holdings Inc's cash conversion cycle has fluctuated over the years, with some periods showing improvements in efficiency and others experiencing slight increases. However, the company has generally maintained a relatively low CCC, which indicates efficient working capital management and a strong focus on transforming investments into cash flows in a timely manner.