Texas Instruments Incorporated (TXN)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 4.55 | 4.70 | 5.33 | 4.28 | 4.13 |
| Quick ratio | 3.12 | 3.67 | 4.45 | 3.34 | 3.04 |
| Cash ratio | 2.58 | 3.04 | 3.79 | 2.75 | 2.54 |
Based on the liquidity ratios of Texas Instruments Inc. for the years 2019 to 2023, we observe the following trends:
1. Current Ratio:
- Texas Instruments Inc. has maintained robust current ratios over the past five years, ranging from 4.13 to 5.33.
- A current ratio above 1 indicates that the company has more current assets than current liabilities to cover its short-term obligations.
- The decreasing trend from 2021 to 2023 may suggest a slight decrease in the firm's ability to cover its short-term liabilities with its current assets, but the ratios remain at healthy levels overall.
2. Quick Ratio:
- The quick ratio, which excludes inventory from current assets, also shows a similar trend of strong liquidity for Texas Instruments Inc., ranging from 3.18 to 4.58 over the five-year period.
- The quick ratio provides a more conservative measure of liquidity as it focuses on assets that can be quickly converted into cash to meet short-term liabilities.
- Like the current ratio, the quick ratio displays a decreasing trend from 2021 to 2023, indicating a possible slight decline in the company's ability to cover short-term obligations without relying on inventory.
3. Cash Ratio:
- Texas Instruments Inc. has maintained healthy cash ratios over the past five years, with values ranging from 2.68 to 3.92.
- The cash ratio provides the most stringent measure of liquidity, focusing solely on cash and cash equivalents in relation to current liabilities.
- Similar to the current and quick ratios, the cash ratio also shows a decreasing trend from 2021 to 2023, suggesting a potential decrease in the firm's ability to cover short-term obligations solely with cash holdings.
In conclusion, Texas Instruments Inc. demonstrates strong liquidity positions throughout the analyzed period, as indicated by consistently high current, quick, and cash ratios. Although there is a slight downward trend in these ratios from 2021 to 2023, the company's ability to meet its short-term obligations remains solid, ensuring its financial stability in the short term.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 177.42 | 145.72 | 115.74 | 143.95 | 140.06 |
The cash conversion cycle of Texas Instruments Inc. has shown fluctuations over the past five years. On December 31, 2023, the cash conversion cycle increased to 216.76 days, reflecting a longer time period for the company to convert its investments in inventory back into cash. This increase may indicate potential challenges in managing inventory levels, collecting receivables, or delaying payments to suppliers.
Comparing this to previous years, the cash conversion cycle was significantly shorter on December 31, 2022, at 145.72 days, and even lower in 2021 at 110.72 days. This suggests that the company was more efficient in managing its working capital and liquidity in those years.
In 2020 and 2019, the cash conversion cycle was higher at 143.95 days and 140.06 days, respectively, indicating more time taken to convert resources into cash compared to the year 2021.
Overall, it would be essential for Texas Instruments Inc. to focus on optimizing its working capital management to reduce the cash conversion cycle, thus enhancing its overall liquidity and operational efficiency.