CarGurus (CARG)

CarGurus Inc's liquidity ratios demonstrate a strong ability to meet short-term obligations and cover immediate operating expenses. The current ratio, which measures the company's ability to pay off current liabilities with current assets, has consistently been above 3 over the past five years, indicating a healthy liquidity position.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, also reflects a robust liquidity position for CarGurus Inc. This ratio has remained above 3 throughout the period, indicating that the company has an adequate level of highly liquid assets to cover its short-term obligations 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, also demonstrates a strong liquidity position for CarGurus Inc. The ratio has consistently been above 2, indicating that the company holds sufficient cash reserves to meet its immediate short-term liabilities without needing to rely on other current assets.

Overall, the trend in CarGurus Inc's liquidity ratios over the past five years reflects a consistently strong liquidity position, which suggests that the company has the financial flexibility to weather short-term financial challenges and capitalize on potential opportunities.

---

Additional liquidity measure

The cash conversion cycle of CarGurus Inc has shown significant fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased to -50.05 days, indicating that CarGurus was able to convert its inventory into cash more efficiently compared to the previous year. This improvement suggests better management of inventory, accounts receivable, and accounts payable.

In 2022, the cash conversion cycle was only 0.35 days, almost negligible, indicating that CarGurus had an exceptionally efficient process of converting inventory to cash. This may have been due to streamlined inventory management and effective credit terms negotiation with suppliers and customers.

In 2021, the cash conversion cycle increased to 14.91 days, reflecting a slight slowdown in the company's ability to convert its assets into cash. However, this figure was still relatively low and suggests efficient working capital management.

In 2020, the cash conversion cycle was notably negative at -172.23 days, indicating that CarGurus was able to convert its inventory into cash at a rapid pace. This negative cycle suggests that the company collected cash from customers before paying its suppliers, leading to a favorable working capital position.

In 2019, the cash conversion cycle was significantly negative at -355.62 days, highlighting an even more efficient cash conversion process compared to 2020. This very low figure indicates that CarGurus was able to collect cash from customers much earlier than paying its suppliers, leading to strong cash flow management.

Overall, CarGurus has shown various levels of efficiency in managing its cash conversion cycle over the analyzed period. The fluctuations in the cash conversion cycle reflect the company's ability to effectively manage its working capital and optimize its operations for improved cash flow generation.