Dream Finders Homes Inc (DFH)

Based on the provided data for Dream Finders Homes Inc, we can analyze the liquidity ratios as follows:

1. Current Ratio:
- The current ratio reflects the company's ability to cover its short-term liabilities with its current assets.
- In December 31, 2021, the current ratio was 1.70, indicating that the company had $1.70 in current assets for every $1 in current liabilities.
- The ratio decreased to 1.59 by December 31, 2022, suggesting a slight weakening in liquidity.
- By December 31, 2023, the current ratio significantly improved to 3.28, indicating a substantial increase in liquidity and ability to meet short-term obligations.
- However, by December 31, 2024, the current ratio fell to 1.78, showing a decrease in liquidity compared to the previous year.

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.
- In December 31, 2021, the quick ratio was relatively low at 0.30, indicating a limited ability to cover immediate liabilities without relying on inventory.
- The ratio improved to 0.39 by December 31, 2022, suggesting a slight enhancement in short-term liquidity.
- By December 31, 2023, the quick ratio increased significantly to 1.03, indicating a stronger ability to cover short-term obligations without relying on inventory.
- However, by December 31, 2024, the quick ratio decreased to 0.28, signaling a decline in liquidity compared to the previous year.

3. Cash Ratio:
- The cash ratio specifically measures the company's ability to cover its current liabilities using only cash and cash equivalents.
- The cash ratio aligns with the quick ratio values due to the exclusion of inventory.
- The data shows consistency with the quick ratio values across different years.

Overall, the liquidity ratios of Dream Finders Homes Inc displayed fluctuations over the years, with notable improvements in liquidity metrics in 2023 followed by some decrease in 2024. The company's ability to cover short-term obligations varied, reflecting changes in the composition of current assets and liabilities.

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Additional liquidity measure

The cash conversion cycle of Dream Finders Homes Inc has shown fluctuations over the years. As of December 31, 2021, the company's cash conversion cycle was 241.77 days, indicating that it takes Dream Finders Homes Inc approximately 241.77 days to convert its investments in inventory into cash receipts from customers.

By December 31, 2022, the cash conversion cycle improved to 157.57 days, suggesting a more efficient management of inventory and accounts receivable, resulting in a quicker conversion of investments into cash.

The trend continued to improve in the following year, with the cash conversion cycle reducing to 151.70 days as of December 31, 2023. This indicates a further enhancement in the efficiency of Dream Finders Homes Inc's operations and collection processes.

However, there seems to be an anomaly as of December 31, 2024, where the cash conversion cycle significantly increased to 1,337.34 days. This substantial increase may raise concerns about the company's ability to efficiently manage its working capital and convert investments into cash within a reasonable timeframe.

Overall, the analysis of Dream Finders Homes Inc's cash conversion cycle reflects improvements in operational efficiency over the years, with one notable exception in 2024 that warrants further investigation into potential causes and implications for the company's financial health.