Sonos Inc (SONO)

The current ratio measures Sonos Inc's ability to cover its short-term liabilities with its current assets. Over the past five years, Sonos' current ratio has fluctuated, ranging from a low of 1.51 in 2024 to a high of 2.01 in 2021. The ratios above 1 indicate that the company has more current assets than current liabilities, which is generally seen as a positive sign of liquidity. However, a decreasing trend in the current ratio over the years may signal a potential liquidity concern.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Sonos Inc's quick ratio has also shown variability, with a low of 0.70 in 2022 and a high of 1.56 in 2021. A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on the sale of inventory.

The cash ratio specifically focuses on the company's ability to cover its short-term liabilities with cash and cash equivalents. Sonos' cash ratio has fluctuated over the years, with a low of 0.51 in 2022 and a high of 1.34 in 2021. A cash ratio below 1 implies that the company may not have sufficient cash on hand to meet its immediate obligations.

Overall, Sonos Inc's liquidity ratios indicate that the company has generally been able to meet its short-term obligations in the past five years. However, the downward trends in the quick and cash ratios in recent years may warrant further investigation into the company's liquidity position and management of short-term assets and liabilities.

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Additional liquidity measure

The cash conversion cycle of Sonos Inc has fluctuated over the past five years. In the most recent period, as of September 30, 2024, the company's cash conversion cycle stands at 21.31 days. This indicates that it takes Sonos approximately 21.31 days to convert its investments in inventory and other resources into cash received from sales.

Comparing this to previous years, we observe a significant improvement from the negative cash conversion cycle of -6.37 days in 2020 to the current positive value in 2024. This change suggests that Sonos has become more efficient in managing its working capital over the years.

The sharp increase in the cash conversion cycle from 2021 to 2023, followed by a notable decline in 2024, may indicate fluctuations in Sonos' operations and cash flow management during those periods. It is important for the company to continue monitoring and optimizing its cash conversion cycle to ensure efficient utilization of resources and sustained cash flow generation.

Overall, while the recent improvement in the cash conversion cycle is positive, continued focus on working capital management will be necessary for Sonos Inc to maintain its operational efficiency and financial health in the future.