DR Horton Inc (DHI)

D.R. Horton Inc.'s liquidity ratios indicate the company's ability to meet short-term obligations. The current ratio, which measures the company's ability to pay its short-term liabilities with its short-term assets, has been consistently strong over the past five years, averaging around 4.79. This suggests that the company has a sufficient level of current assets to cover its short-term liabilities.

The quick ratio, which provides a more stringent measure by excluding inventory from current assets, has shown some variability but remained above 1 for the most part. This indicates that the company has an acceptable level of highly liquid assets to cover its short-term obligations, although there was a slight dip in 2022.

The cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, also demonstrates a healthy trend. The ratio has generally been above 1, indicating that D.R. Horton Inc. has had more than enough cash to cover its current liabilities.

Overall, these liquidity ratios suggest that D.R. Horton Inc. has maintained a strong position in terms of its ability to meet its short-term financial commitments over the past five years.

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Additional liquidity measure

The cash conversion cycle (CCC) measures the length of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter CCC indicates more efficient management of working capital.

Looking at D.R. Horton Inc.'s CCC over the past five years, we observe fluctuations. In 2023, the CCC decreased to 298.77 days from 326.22 days in 2022. This reduction could suggest improved efficiency in managing the company's working capital and converting sales to cash. However, in 2022, there was an increase in the CCC from 284.14 days in 2021, which may indicate a slowdown in the cash conversion process.

Moreover, the CCC in 2021 improved from 273.20 days in 2020, signifying a shorter time to convert resources into cash flows, potentially reflecting strong working capital management. However, in 2020, there was a slight increase from 286.96 days in 2019, indicating a longer cash conversion cycle and potentially less efficient management of working capital.

Overall, it is essential to monitor these fluctuations in D.R. Horton Inc.'s cash conversion cycle to assess its effectiveness in managing working capital and converting investments into cash flows.