Builders FirstSource Inc (BLDR)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.77 | 1.77 | 1.90 | 1.86 | 2.07 |
| Quick ratio | 0.09 | 0.04 | 0.04 | 0.02 | 0.39 |
| Cash ratio | 0.09 | 0.04 | 0.04 | 0.02 | 0.39 |
Builders FirstSource Inc's liquidity ratios indicate how well the company can meet its short-term obligations. The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has shown a slight decrease from 2.07 in 2020 to 1.77 in 2024. While the current ratio above 1 signifies that the company has more current assets than current liabilities, the downward trend suggests a potential weakening liquidity position.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Builders FirstSource Inc's quick ratio has also exhibited a decline from 0.39 in 2020 to 0.09 in 2024. A quick ratio below 1 indicates that the company may have difficulties meeting its short-term obligations without relying on selling inventory.
The cash ratio, a more conservative liquidity metric that considers only cash and cash equivalents in relation to current liabilities, mirrors the trend seen in the quick ratio, declining from 0.39 in 2020 to 0.09 in 2024. A low cash ratio may indicate that the company has limited cash reserves to cover immediate liabilities.
Overall, the declining trend in the current ratio, quick ratio, and cash ratio over the years raises concerns about Builders FirstSource Inc's liquidity position and suggests a potential need for the company to improve its management of current assets and liabilities to ensure financial stability in the future.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 40.17 | 40.44 | 34.75 | 42.27 | 45.19 |
The cash conversion cycle of Builders FirstSource Inc has shown a decreasing trend over the past five years. As of December 31, 2020, the company's cash conversion cycle was 45.19 days, but by December 31, 2024, it had decreased to 40.17 days. This indicates that the company has been able to manage its cash flow more efficiently, reducing the time it takes to convert its investments in inventory into cash receipts from sales.
However, there was a slight increase in the cash conversion cycle from 2022 to 2023, signaling a temporary delay in the conversion process. Overall, the downward trend in the cash conversion cycle is a positive sign of improved working capital management, potentially leading to increased liquidity and profitability for Builders FirstSource Inc.