Wolfspeed Inc (WOLF)

Wolfspeed Inc's liquidity ratios provide insight into the company's ability to meet its short-term obligations and cover immediate financial needs. The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has shown fluctuations over the past five years. The ratio has ranged from 3.29 in 2021 to 5.74 in 2023, indicating varying levels of liquidity.

The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, has followed a similar trend. Wolfspeed Inc's quick ratio has ranged from 2.82 in 2021 to 4.98 in 2023, reflecting the company's ability to meet its short-term liabilities without relying on inventory.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents to cover current liabilities, has also shown variability. The cash ratio for Wolfspeed Inc ranged from 2.57 in 2021 to 4.71 in 2023, indicating the company's ability to cover its short-term obligations solely with cash on hand.

Overall, Wolfspeed Inc has maintained relatively strong liquidity positions based on these ratios over the past five years. The company has generally been able to cover its short-term financial obligations comfortably, with varying levels of liquidity reserves. However, fluctuations in these ratios over time suggest that the company's liquidity position may have been impacted by factors such as changes in working capital management or cash flow dynamics.

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Additional liquidity measure

The cash conversion cycle of Wolfspeed Inc has fluctuated over the past five years. In 2024, the company's cash conversion cycle increased to 234.71 days from 171.12 days in 2023. This indicates that the company required more time to convert its investments in inventory and other resources into cash during the most recent fiscal year.

Comparing 2024 to earlier years, the cash conversion cycle was significantly longer than the 166.38 days in 2021 and the 56.23 days in 2020. This suggests that Wolfspeed Inc faced challenges in efficiently managing its working capital and cash flow during the latest period.

The company's cash conversion cycle was also notably higher in 2022 at 238.45 days. However, it is worth noting that the cycle has displayed variability in recent years, with periods of both longer and shorter cycles. This variability could be influenced by changes in the company's operations, market demand, or inventory management practices.

Overall, analyzing Wolfspeed Inc's cash conversion cycle provides insights into its liquidity management and efficiency in converting investment in resources into cash. The company may benefit from evaluating its working capital management strategies to improve cash flow and operational efficiency in the future.