Super Micro Computer Inc (SMCI)

Super Micro Computer Inc's liquidity ratios provide insight into the company's ability to meet its short-term obligations. Let's analyze the liquidity ratios over the past five years:

1. Current Ratio:
The current ratio measures the company's ability to pay its short-term liabilities with its short-term assets. Super Micro Computer Inc's current ratio has fluctuated over the past five years, ranging from 1.91 to 2.35. The current ratio has generally been above 1, indicating that the company has had sufficient current assets to cover its current liabilities. The improvement in the current ratio from 2021 to 2023 suggests that the company has strengthened its ability to meet short-term obligations.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Super Micro Computer Inc's quick ratio has also shown fluctuation, ranging from 0.85 to 1.26 over the past five years. The quick ratio has generally been lower than the current ratio, suggesting that inventory forms a significant portion of the company's current assets. The substantial increase in the quick ratio from 2021 to 2023 is a positive indicator of the company's improved ability to meet short-term obligations without relying on inventory liquidation.

3. Cash Ratio:
The cash ratio measures the proportion of current liabilities that can be covered by cash and cash equivalents. Super Micro Computer Inc's cash ratio has ranged from 0.20 to 0.43 over the past five years. The cash ratio has generally been lower than both the current and quick ratios, indicating that the company's cash and cash equivalents represent a relatively smaller portion of its current assets. The increase in the cash ratio from 2022 to 2023 indicates an improvement in the company's ability to cover its short-term obligations with cash.

Overall, the increasing trend in the current, quick, and cash ratios from 2021 to 2023 reflects Super Micro Computer Inc's strengthened liquidity position, suggesting an improved ability to meet its short-term obligations. However, it's important to consider the overall trend in the context of the company's specific business and industry dynamics to form a comprehensive assessment of its liquidity.

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See also:

Super Micro Computer Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle (CCC) indicates how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The CCC is calculated by adding the days inventory outstanding (DIO) to the days sales outstanding (DSO) and subtracting the days payable outstanding (DPO).

The data for Super Micro Computer Inc shows the following trend in the cash conversion cycle:

- In 2023, the cash conversion cycle decreased to 100.63 days, indicating an improvement in the company's ability to convert its resources into cash.
- In 2022, the cash conversion cycle increased to 142.23 days, suggesting a longer time to convert investments into cash compared to the previous year.
- In 2021, the cash conversion cycle was 109.60 days, showing a shorter cycle compared to the prior year, indicating a positive trend.
- In 2020, the cash conversion cycle was 110.79 days, slightly longer than the previous year, indicating a potential slowdown in cash conversion.
- In 2019, the cash conversion cycle was 87.33 days, indicating a relatively shorter time to convert investments into cash.

Overall, the trend in Super Micro Computer Inc's cash conversion cycle shows some variation over the years. The company experienced fluctuations in its ability to convert investments into cash, with improvements in some years and slowdowns in others. It is important for the company to analyze the underlying factors affecting the components of the cash conversion cycle, such as inventory management, sales collection, and payment terms with suppliers, to identify areas for potential improvement.