SolarWinds Corp (SWI)

The liquidity ratios of SolarWinds Corp have shown fluctuations over the past five years.

Starting with the current ratio, which measures the company's ability to cover its short-term obligations with its current assets, we see a declining trend from 2019 to 2020, followed by a significant improvement in 2021 before dropping again in 2022 and 2023. The current ratio was lowest in 2022 at 0.67, indicating that the company may have difficulties meeting its short-term liabilities with its current assets.

Moving on to the quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, we observe a similar trend to the current ratio. The quick ratio was lowest in 2022 at 0.55, suggesting that the company may struggle to meet its short-term obligations without relying on inventory.

Lastly, looking at the cash ratio, which is the most conservative measure of liquidity as it only includes cash and cash equivalents in current assets, we see fluctuations similar to the current and quick ratios. The cash ratio was lowest in 2022 at 0.33, indicating that the company had the least amount of cash available to cover its short-term liabilities in that year.

Overall, SolarWinds Corp's liquidity ratios have shown inconsistency over the past five years, with potential concerns arising from the declining trend in the current, quick, and cash ratios in 2022 and 2023. It is important for the company to closely monitor its liquidity position and take necessary actions to improve its ability to meet short-term obligations.

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Additional liquidity measure

The cash conversion cycle of SolarWinds Corp has shown variability over the past five years. In 2019, the company had a cash conversion cycle of 41.71 days, which decreased to 37.97 days in 2020, and further reduced to 37.08 days in 2021. However, there was a significant improvement in efficiency in 2022 when the company managed to have a negative cash conversion cycle of -2.07 days, indicating that the company was able to convert its investments in inventory and accounts receivable into cash at a faster rate than paying its accounts payable.

In 2023, the cash conversion cycle increased to 9.29 days, indicating a longer time to convert investments in inventory and accounts receivable into cash compared to the previous year. This suggests that the company may be facing challenges in managing its working capital efficiently.

Overall, fluctuations in the cash conversion cycle of SolarWinds Corp reflect changes in its operational efficiency and working capital management over the past years. A lower and preferably negative cash conversion cycle is generally seen as more favorable as it indicates that the company is efficiently managing its working capital and converting its assets into cash quickly.