Teradyne Inc. (NASDAQ:TER)

The analysis of liquidity ratios over the reported periods reveals fluctuations in the company's short-term financial health and ability to cover liabilities.

Current Ratio

The current ratio demonstrates relative stability with values generally remaining above 3.0, indicating a strong ability to meet short-term obligations. There is a notable dip to 2.74 in July 2021, followed by a recovery and slight fluctuations around the 3.0 mark for subsequent quarters. The ratio peaks at 3.73 in March 2024, suggesting an improvement in current asset coverage relative to current liabilities over the longer term.

Quick Ratio

The quick ratio, which excludes inventory from current assets, shows a downward trend from 2.51 at March 2020 to a low of 1.79 in October 2023, reflecting a reduction in the most liquid assets available to cover current liabilities. However, it rebounds to 2.12 by March 2024, signaling a recovery in liquid asset reserves. The overall pattern suggests some variability in liquid asset management, with occasional challenging periods especially during 2022 and 2023.

Cash Ratio

The cash ratio, the most conservative liquidity measure, exhibits a general declining trend from 1.57 in March 2020 down to a low around 0.98 in July 2022. This corresponds to a reduced immediate cash and cash equivalents buffer against current liabilities during that period. From mid-2022 onwards, a gradual improvement is observed, reaching 1.35 by March 2024. The ratio remains above 1.0 in most periods except for mid-2022, indicating sufficient cash reserves to cover current liabilities in almost all quarters.

In summary, the company maintains strong short-term liquidity with some volatility in liquid assets and cash reserves during the examined time frame. Recent quarters demonstrate a positive recovery in liquidity metrics, potentially reflecting strategic management of working capital and cash resources to enhance financial flexibility.

Current Assets

The current assets exhibit a generally fluctuating trend over the periods analyzed. Beginning at approximately 1.7 billion USD in early 2020, current assets increased significantly, peaking above 2.6 billion USD in mid-2021. Following this peak, a downward adjustment is observed with values gradually declining towards approximately 2.1 billion USD by early 2023. Subsequently, the figures stabilize around the 2.1 billion USD mark, with a slight decrease noted in the most recent period to about 2.06 billion USD. This indicates some variability but a general maintenance of current asset levels around the 2 billion USD range in the latter periods.

Current Liabilities

Current liabilities show notable volatility across the same timeframe. Starting at around 514 million USD in early 2020, liabilities rose sharply to nearly 1 billion USD by mid-2021, coinciding with the peak in current assets. A subsequent decline follows, with liabilities decreasing to levels closer to 554 million USD in the latest period. Overall, current liabilities demonstrate significant fluctuations, with periods of sharp increases followed by reductions, reflecting possible changes in short-term obligations or payables.

Current Ratio

The current ratio remains consistently above 2.7 throughout all periods, indicating a strong liquidity position. Initial ratios started at 3.31 in early 2020, decreased to about 2.74 mid-2021, then showed recovery and stability near 3.2 to 3.3 for most periods. The ratio reaches its highest value of 3.73 in the most recent quarter, suggesting improved liquidity and a comfortable ability to cover current liabilities with current assets. This stable and relatively high current ratio illustrates a sound short-term financial health despite the fluctuations in assets and liabilities.

Overall Analysis

The data reflect a company maintaining a healthy liquidity position throughout the observed periods, as evidenced by consistently high current ratios above industry norms. While both current assets and liabilities experience several fluctuations, particularly a peak in mid-2021 followed by some normalization, the entity appears to manage its working capital effectively. The rise and fall in liabilities alongside asset variations might correspond to strategic financing or operational adjustments. The strong current ratios indicate the company generally retains sufficient current assets to cover liabilities, reducing liquidity risk.

The financial data reveals several notable trends in liquidity and short-term financial stability over the observed periods.

Total quick assets

The total quick assets demonstrate an initial upward trend from early 2020 through the end of 2020, rising from approximately 1.29 billion USD to 1.93 billion USD. In the first half of 2021, they remained relatively stable, fluctuating slightly around 1.9 to 2.1 billion USD. Subsequently, a downward trend is evident from early 2022 through early 2023, with quick assets declining to just below 1.2 billion USD. The latter quarters of 2023 and the first quarter of 2024 show a marginal recovery, with values increasing modestly, though they remain below the 2020 and 2021 peaks.

Current liabilities

Current liabilities fluctuate considerably over the time period. Beginning at approximately 514 million USD in the first quarter of 2020, current liabilities increase sharply mid-2020, peaking at nearly 985 million USD in the second quarter of 2021. After this peak, liabilities exhibit a slight decline with some volatility but remain elevated, generally hovering between 600 and 800 million USD. In the final period observed (Q1 2024), liabilities decrease further to around 554 million USD, approaching the earlier levels recorded in early 2020.

Quick ratio

The quick ratio reflects the trends seen in quick assets and current liabilities, initially decreasing from 2.51 in Q1 2020 to a low of 2.14 in Q2 2021 amidst rising liabilities. The ratio recovers somewhat thereafter to values around 2.5 in late 2021 but then declines again throughout 2022 and 2023, reaching lows near 1.79. Notably, the quick ratio shows improvement in the last quarters of the data set, rising to 2.12 by Q1 2024, suggesting a strengthening liquidity position.

Overall, the data indicates that the company maintained a strong liquidity position throughout the period, with quick ratios consistently above 1, indicating the ability to cover current liabilities with quick assets. However, there was a period of increased short-term liabilities in mid-2021, which negatively impacted liquidity ratios. The subsequent decline in quick assets through 2022 and early 2023, coupled with fluctuating liabilities, led to some pressure on liquidity, though recent quarters suggest a recovery trend. These fluctuations may reflect operational or market conditions impacting working capital management.

Cash Assets Trend

Total cash assets initially increased significantly from approximately $804 million in March 2020 to a peak of about $1.44 billion by December 2020. Following this peak, cash assets fluctuated with a general downward trend into 2022, reaching a low near $776 million in October 2022. Since then, cash assets have shown moderate recovery, rising again to around $819 million by the end of 2023 before slightly declining to approximately $749 million in March 2024.

Current Liabilities Trend

Current liabilities exhibited volatility over the period. They rose sharply from about $514 million in March 2020 to nearly $985 million in July 2021, indicating an increase in short-term obligations. After that peak, current liabilities fluctuated but generally trended downward starting in early 2023, declining to approximately $554 million by March 2024, the lowest point observed in the dataset.

Cash Ratio Analysis

The cash ratio, representing liquidity by comparing cash assets to current liabilities, showed significant variation over time. It peaked at 2.05 in December 2020, reflecting a strong liquidity position. After this peak, the ratio decreased markedly to below 1.0 (0.98) in July 2022, suggesting diminished liquidity relative to current liabilities. Since then, the ratio has modestly improved, reaching 1.35 by March 2024, indicating a recovering but still cautious liquidity stance.

Overall Insights

The data indicates a period of initial liquidity strengthening through 2020, with cash assets growing faster than current liabilities. Midway through the timeline, notably in 2021, the company experienced increased current liabilities alongside fluctuating cash positions, resulting in a temporarily compressed cash ratio. The decline in liquidity around mid-2022 suggests increased short-term financial pressure, which appears to have stabilized and somewhat improved into 2023 and early 2024. The improvement in the cash ratio toward the end of the period signals a cautious recovery of the company's liquidity position.