Tetra Tech Inc (TTEK)

Tetra Tech Inc's liquidity ratios provide insights into the company's ability to meet short-term financial obligations. The current ratio, which measures the company's ability to cover current liabilities with current assets, has shown some fluctuations over the past five years, ranging from 1.12 in 2023 to 1.26 in 2022, 2021, and 2020. A current ratio above 1 indicates that the company has more current assets than current liabilities, suggesting a healthy liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Tetra Tech's quick ratio has shown a similar trend to the current ratio, fluctuating between 0.95 in 2023 to 1.07 in 2024. These ratios indicate that the company has an adequate level of liquid assets to cover immediate liabilities, with a ratio above 1 considered favorable.

The cash ratio, which specifically measures the company's ability to cover current liabilities with cash and cash equivalents, has also shown stability, ranging from 0.14 in 2023 to 0.21 in 2020. The cash ratio, though lower compared to the current and quick ratios, provides a conservative measure of liquidity and indicates Tetra Tech's ability to meet short-term obligations with readily available cash.

Overall, Tetra Tech Inc's liquidity ratios demonstrate a relatively stable and favorable liquidity position over the past five years, indicating the company's ability to manage its short-term financial obligations effectively. However, it is essential for investors and stakeholders to continue monitoring these ratios to ensure sustained liquidity levels in the future.

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Additional liquidity measure

The cash conversion cycle of Tetra Tech Inc has shown significant improvements over the past few years. In the most recent period ending Sep 30, 2024, the company's cash conversion cycle stood at -204.77 days, indicating a negative cycle. This implies that Tetra Tech is able to generate cash from its operations before paying suppliers and creditors.

Comparing this to the previous years, Tetra Tech has made remarkable progress in managing its working capital and cash flow efficiency. In Sep 30, 2023, the cash conversion cycle was -653.41 days, and it further improved in Sep 30, 2022, where the cycle was -1,285.95 days. This trend continued in the preceding years, with the cash conversion cycle amounting to -1,281.77 days in Sep 30, 2021, and -789.95 days in Sep 30, 2020.

The negative values of the cash conversion cycle indicate that Tetra Tech has been able to optimize its operations effectively to convert its resources into cash quickly. This can be attributed to efficient management of accounts receivable, inventory, and accounts payable. Overall, the company's ability to operate with a negative cash conversion cycle reflects strong liquidity and working capital management, which may enable Tetra Tech to fund its operations and growth effectively.