SolarWinds Corp (SWI)

Based on the provided data, SolarWinds Corp's liquidity ratios show fluctuations over the years.

1. Current Ratio:
- The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, improved from 1.04 in 2020 to 2.08 in 2021, indicating a stronger financial position.
- However, the ratio declined in the following years, reaching 0.67 in 2022, which suggests a potential difficulty in meeting short-term obligations. The ratio slightly improved in 2023 and 2024 but remained below the ideal ratio of 1.

2. Quick Ratio:
- The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, followed a similar trend to the current ratio.
- It increased from 0.99 in 2020 to 2.00 in 2021, indicating an improvement in the company's ability to meet short-term liabilities without relying on inventory.
- However, the quick ratio decreased significantly in 2022 to 0.55, signaling potential liquidity challenges. It slightly recovered in the subsequent years but remained below optimal levels.

3. Cash Ratio:
- The cash ratio, which provides the most conservative measure of liquidity by assessing the company's ability to cover current liabilities with cash and cash equivalents only, displayed a mixed trend.
- It saw a substantial improvement from 0.75 in 2020 to 1.77 in 2021, indicating a stronger ability to meet short-term obligations with readily available cash.
- However, the ratio declined in 2022 to 0.33, signaling a possible reduction in the company's cash reserves. It rose slightly in 2023 and 2024 but remained below the levels seen in 2021.

Overall, while SolarWinds Corp showed improvement in liquidity ratios in 2021, there were declines in subsequent years, particularly in 2022. The downward trend in these ratios suggests potential challenges in meeting short-term obligations and managing liquidity effectively. Further analysis of the company's cash flow and working capital management may provide additional insights into its liquidity position.

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Additional liquidity measure

The cash conversion cycle of SolarWinds Corp has shown some fluctuations over the years based on the provided data. As of December 31, 2020, the cash conversion cycle was at 37.97 days, indicating the average number of days it takes for the company to convert its investments in inventory and other resources into cash inflows.

By the end of 2021, there was a slight improvement, with the cash conversion cycle decreasing to 37.08 days. This suggests that the company managed its working capital more efficiently during that period.

Unexpectedly, by December 31, 2022, the cash conversion cycle turned negative at -2.07 days. A negative cycle could imply that the company is able to collect cash from customers before paying its suppliers or has efficient inventory turnover, potentially indicating a strong cash position.

However, by the end of 2023, the cycle increased to 9.29 days, indicating a longer time to convert investments into cash compared to the previous year. This increase may be due to changes in the company's operations, such as slower collections from customers or delays in inventory turnover.

As of December 31, 2024, the cash conversion cycle further increased to 20.15 days. This suggests that SolarWinds Corp may be facing challenges in managing its working capital efficiently, which could lead to cash flow issues if not addressed promptly.

In conclusion, the fluctuations in SolarWinds Corp's cash conversion cycle over the years highlight the importance of monitoring working capital management closely to ensure the company's financial health and sustainability.