DR Horton Inc (DHI)

DR Horton Inc's liquidity ratios indicate the company's ability to meet its short-term financial obligations.

1. Current ratio: This ratio compares current assets to current liabilities, reflecting the company's ability to cover its short-term liabilities with its short-term assets. DR Horton Inc's current ratio has ranged from 82.04 to 102.75 over the past five years, showing a fluctuating trend. The current ratio was highest in 2021 and 2020, indicating the company had more than enough current assets to cover its current liabilities. However, the ratio decreased in 2022 and 2024, although it remained well above 1, indicating a strong ability to meet short-term obligations.

2. Quick ratio: The quick ratio, also known as the acid-test ratio, measures the company's ability to meet short-term obligations without relying on inventory. DR Horton Inc's quick ratio has ranged from 42.27 to 68.45 over the past five years. The company's quick ratio decreased in 2022 but increased in 2024. A higher quick ratio suggests better short-term liquidity, but DR Horton Inc's ratios indicate fluctuations in this aspect.

3. Cash ratio: The cash ratio measures the company's ability to cover its short-term liabilities with cash and cash equivalents alone. DR Horton Inc's cash ratio has also ranged from 42.27 to 68.45 over the past five years. The cash ratio reflects a company's immediate ability to pay off its short-term obligations. Like the quick ratio, the cash ratio also fluctuates with no consistent trend over the years for DR Horton Inc.

Overall, DR Horton Inc's liquidity ratios show that the company generally maintains strong liquidity and can meet its short-term debt obligations. However, the fluctuations in these ratios suggest that the company's liquidity position may vary over time and require prudent management of working capital and cash flow.

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Additional liquidity measure

The cash conversion cycle of DR Horton Inc has shown fluctuations over the past five years. In 2024, the cash conversion cycle increased to 333.37 days compared to the previous year, indicating that the company took longer to convert its investments in inventory and accounts receivable into cash. This could be a sign of inefficiency in managing working capital.

In 2023, there was a slight improvement in the cash conversion cycle to 312.76 days, but it worsened again in 2022 to 344.03 days. This inconsistency in performance suggests potential challenges in controlling inventory levels and collecting receivables efficiently.

In 2021, there was a notable improvement in the cash conversion cycle to 302.27 days, indicating that the company managed its working capital more effectively. However, in 2020, there was a slight increase to 290.55 days.

Overall, the trend in the cash conversion cycle of DR Horton Inc shows some variability, pointing to potential areas for improvement in managing cash flows, inventory, and accounts receivable to enhance operational efficiency and profitability over time.