First Solar Inc. (NASDAQ:FSLR)

Liquidity Ratios Overview

The analysis of the current ratio, quick ratio, and cash ratio over the observed quarterly periods reveals a general downward trend in the company's liquidity position from early 2020 through late 2024.

Current Ratio Trends

The current ratio began at a robust 3.75 in the first quarter of 2020, demonstrating strong short-term liquidity. The ratio peaked notably in mid-2021, reaching values above 4.6, indicating an increased buffer of current assets relative to current liabilities during this phase. However, from late 2021 onward, the current ratio experienced a gradual decline, falling below 3.1 by early 2023 and continuing to decrease even further, reaching approximately 2.14 by the third quarter of 2024. This trend suggests a diminishing cushion of liquid assets to cover short-term obligations over the period.

Quick Ratio Trends

The quick ratio followed a pattern similar to the current ratio. It started at 2.46 in the first quarter of 2020 and increased to a peak around 3.55 by mid-2021, reflecting a strengthened ability to meet short-term liabilities using the most liquid assets, excluding inventories. Following the peak, a consistent downward trajectory ensued, with the ratio dropping to just above 2.1 by early 2023 and declining further to just above 1.1 by the third quarter of 2024. This decrease indicates a reduced level of highly liquid assets relative to current liabilities.

Cash Ratio Trends

The cash ratio also exhibited a decline over the analysis period, though it started at a relatively high base of 2.06 in early 2020. It peaked modestly around 2.7 in mid to late 2021. Subsequently, there was a more pronounced decline, with the ratio falling below 2.0 by early 2023 and continuing downward, eventually approaching 0.71 by the third quarter of 2024. This reflects a significant reduction in cash and cash equivalents available to cover current liabilities, indicating a tightening of cash liquidity.

Summary of Liquidity Position

All three liquidity ratios peaked in mid-2021, suggesting a period in which the company maintained strong liquidity buffers. However, the consistent decline across all ratios from late 2021 through 2024 signals a gradual compression of liquid assets relative to current liabilities. The current ratio remaining above 2 throughout most of the period suggests the company can still cover its short-term debts twice over, but the lower quick and cash ratios point to reliance on inventory or slower-moving assets for liquidity and a need to monitor cash levels closely. These declining trends may warrant further investigation into the factors influencing the reduction in liquid assets and any potential impacts on operational flexibility and financial stability.

The analysis of recent quarterly financial data reveals several notable trends in liquidity and working capital management.

Current Assets

The value of current assets exhibits a general upward trend throughout the periods, starting at approximately $2.75 billion and reaching a peak of around $4.63 billion in late 2023. There is some fluctuation between quarters, but the overall movement indicates an increasing base of short-term assets available to cover liabilities.

Current Liabilities

Current liabilities have shown a gradual increase over the timeframe. Beginning at about $732 million, liabilities rose steadily, particularly after mid-2022, reaching roughly $1.78 billion by the third quarter of 2024. The acceleration in liabilities in recent quarters suggests increased short-term obligations or operational expenditures.

Current Ratio

The current ratio started at a healthy level of about 3.75, reflecting strong liquidity with assets significantly exceeding liabilities. This ratio peaked near 4.77 in mid-2021 but has declined each quarter since then, currently approaching a ratio around 2.14. While this still denotes the capability to cover short-term liabilities over twice, the downward trend indicates tightening liquidity.

In summary, although the company maintains a balance sheet where current assets exceed liabilities by a comfortable margin, the margin has been compressing notably after 2021. The increase in current liabilities at a faster pace compared to current assets points to greater short-term financial commitments. The declining current ratio trend may warrant monitoring to ensure the company maintains sufficient liquidity to meet near-term obligations without financial strain.

The analysis of the quarterly financial data reveals several notable trends in liquidity and current liability management over the examined periods.

Total Quick Assets

The total quick assets generally show a fluctuating trend with periods of both growth and decline. Starting from approximately 1.80 billion US dollars at the end of Q1 2020, quick assets increased steadily to peak at about 3.42 billion US dollars by the end of Q4 2023. However, in the subsequent quarters of 2024, there is a marked decline, falling to approximately 2.04 billion US dollars by Q3 2024. This pattern indicates periods of asset accumulation followed by a contraction in liquid assets.

Current Liabilities

Current liabilities exhibit a gradual upward trend throughout the timeline. Beginning at roughly 732 million US dollars in Q1 2020, liabilities rose with occasional fluctuations, culminating in a significant increase to approximately 1.78 billion US dollars by Q3 2024. The increase in current liabilities, especially the sharp rise starting from Q1 2023 through mid-2024, suggests increased short-term obligations or a change in working capital structure.

Quick Ratio

The quick ratio demonstrates substantial volatility over the period. Initially, it hovers around the 2.4 to 2.5 range through 2020, reflecting a relatively strong liquidity position. A notable improvement occurs throughout 2021, with the ratio reaching a high of 3.55, indicating excellent short-term financial health during that period. However, a declining trend is observed starting in late 2022 and continuing into 2024, with the ratio dropping below 1.2 by Q3 2024. This downward movement suggests a diminishing buffer of liquid assets relative to current liabilities, indicating potential liquidity pressure in the most recent periods.

In summary, there is a clear pattern of increased current liabilities coupled with a reduction in the quick ratio in recent quarters, despite earlier periods of strong liquidity and asset growth. The data imply that liquidity management may be a growing concern, and monitoring working capital closely would be advisable to mitigate short-term financial risks.

Analysis of the quarterly financial information reveals several notable trends in liquidity and current liabilities over the observed periods.

Total Cash Assets

Total cash assets experienced fluctuations throughout the quarters. Initially, there was a gradual increase from approximately 1.51 billion US dollars at the end of the first quarter of 2020 to a peak near 1.93 billion by the third quarter of 2021. This was followed by a decline during 2022, before rising substantially again by the end of 2022 reaching roughly 2.58 billion. Subsequently, these assets decreased again through the first three quarters of 2024, falling to near 1.27 billion US dollars by the third quarter of 2024. This pattern indicates intermittent periods of cash accumulation followed by drawdowns.

Current Liabilities

Current liabilities remained largely stable around the mid-700 million to low 800 million range for much of 2020 and early 2021. From mid-2021 onward, there was a clear and steady increase, reaching new highs above 1.7 billion US dollars by the third quarter of 2024. This steady upward trend in current liabilities indicates growing short-term obligations over the more recent periods.

Cash Ratio

The cash ratio, an indicator of the company's ability to cover current liabilities with cash and cash equivalents, showed a declining trend over the reported quarters. Starting at a robust level slightly above 2.0 in early 2020 and reaching a peak near 2.69 by the third quarter of 2021, it then exhibited a progressive decrease ending at 0.71 by the third quarter of 2024. This downward trajectory reflects a reduction in liquidity buffer relative to short-term liabilities, suggesting increasing pressure on readily available cash to meet obligations.

Overall, the data indicates that while total cash assets have seen periods of growth, current liabilities have consistently increased in recent years, leading to a diminished cash ratio. This trend implies that the company’s liquidity position has somewhat weakened over time, potentially signaling a need to monitor short-term financial flexibility closely going forward.