Topbuild Corp (BLD)

Topbuild Corp's liquidity ratios, namely the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations with its current assets.

1. Current Ratio:
- The current ratio measures Topbuild Corp's ability to cover its short-term liabilities with its current assets.
- Over the five-year period from 2020 to 2024, the current ratio has fluctuated, starting at 1.89 in 2020, decreasing to 1.62 in 2021, then increasing to 1.96 in 2022, peaking at 2.66 in 2023, and declining slightly to 2.08 in 2024.
- A ratio above 1 indicates the company has more current assets than current liabilities, which is considered a good sign for creditors.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- Topbuild Corp's quick ratio showed a similar fluctuation pattern to the current ratio, starting at 1.53 in 2020, dropping to 1.10 in 2021, then increasing to 1.36 in 2022, peaking at 2.14 in 2023, and settling at 1.50 in 2024.
- A quick ratio of 1 or higher is generally considered satisfactory, indicating the company can cover its short-term liabilities without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, focusing solely on the company's ability to cover its short-term liabilities with cash and cash equivalents.
- Topbuild Corp's cash ratio experienced significant fluctuations over the period, starting at 0.66 in 2020, dropping to 0.19 in 2021, rising to 0.30 in 2022, surging to 1.10 in 2023, and then decreasing to 0.52 in 2024.
- A higher cash ratio indicates a stronger ability to meet short-term obligations using cash on hand, though a very high ratio may imply idle cash that could be utilized more effectively.

In conclusion, Topbuild Corp's liquidity ratios show varying trends over the years, with improvements in liquidity seen in the later years. However, it is important for the company to assess its liquidity position regularly to ensure it can meet its obligations effectively in the short term.

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Additional liquidity measure

The cash conversion cycle of Topbuild Corp has shown some fluctuations over the years. In December 2020, the company's cash conversion cycle was 32.44 days, indicating that it took approximately 32.44 days for the company to convert its investments in inventory and other resources into cash flows from sales.

However, by December 2021, the cash conversion cycle had increased to 58.04 days, implying that the company took longer to convert its resources into cash during that period. The trend continued in 2022 and 2023, with the cash conversion cycle standing at 57.56 days and 48.38 days respectively.

In the most recent financial year ending December 31, 2024, Topbuild Corp managed to improve its cash conversion cycle to 47.52 days, indicating a more efficient management of its working capital and cash flows.

Overall, the company's cash conversion cycle has shown variability over the years, but the recent trend suggests efforts to optimize working capital management and improve cash conversion efficiency.