TE Connectivity Ltd (TEL)
Liquidity ratios
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.77 | 1.57 | 1.56 | 1.57 | 1.57 |
| Quick ratio | 1.04 | 0.85 | 0.89 | 0.90 | 0.92 |
| Cash ratio | 0.37 | 0.23 | 0.26 | 0.26 | 0.26 |
TE Connectivity Ltd's liquidity ratios show a positive trend over the past five years, indicating improving liquidity position.
1. Current Ratio: The current ratio has been consistently above 1.5, with a modest increase in 2023 to 1.77. This implies the company has $1.77 in current assets to cover each dollar of current liabilities, providing a comfortable cushion to meet short-term obligations.
2. Quick Ratio: The quick ratio has shown a significant improvement, reaching 1.04 in 2023. This ratio excludes inventory from current assets, focusing on more liquid assets like cash and accounts receivable. TE Connectivity Ltd's ability to meet short-term liabilities with quick assets has strengthened over the years.
3. Cash Ratio: The cash ratio has also seen a notable increase, reaching 0.37 in 2023. This ratio measures the company's ability to cover current liabilities with its cash and cash equivalents alone. TE Connectivity Ltd has enhanced its cash reserves compared to previous years, which is a positive sign for meeting immediate payment obligations.
Overall, the upward trend in all three liquidity ratios indicates that TE Connectivity Ltd has managed its liquidity effectively, maintaining a strong financial position to meet its short-term obligations.
Additional liquidity measure
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 95.44 | 95.02 | 90.21 | 93.59 | 79.21 |
TE Connectivity Ltd's cash conversion cycle has shown some fluctuation over the past five years. The cycle was at its shortest in 2019, with a period of 79.21 days, before increasing to 93.59 days in 2020. Subsequently, there was a slight improvement in 2021 with the cycle decreasing to 90.21 days. However, in the most recent data available, as of September 30, 2023, the cash conversion cycle increased to 95.44 days.
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. A longer cash conversion cycle can indicate inefficiencies in managing working capital, potentially tying up cash in inventory or accounts receivable for extended periods.
TE Connectivity Ltd may want to focus on streamlining its processes to reduce the time it takes to convert investments into sales and ultimately into cash in order to improve its cash flow efficiency and financial performance over time.