Dril-Quip Inc (DRQ)

Dril-Quip, Inc.'s liquidity ratios have shown a decreasing trend over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, decreased from 9.08 in 2019 to 6.11 in 2023. This indicates that the company may have fewer current assets available to cover its short-term liabilities.

The quick ratio, a more conservative measure of liquidity that excludes inventory from current assets, also declined from 6.97 in 2019 to 4.43 in 2023. This suggests that Dril-Quip may have less liquid assets available to cover its immediate liabilities.

Similarly, the cash ratio, which specifically measures the company's ability to cover its current liabilities with cash and cash equivalents, decreased from 4.41 in 2019 to 2.01 in 2023. This indicates a potential decrease in the company's ability to pay off its short-term obligations solely with cash on hand.

Overall, Dril-Quip, Inc.'s liquidity ratios show a declining trend, signaling potential challenges in meeting short-term obligations with available liquid assets. This trend warrants further analysis to understand the underlying reasons for the decrease and to assess the company's liquidity management strategies.

---

Additional liquidity measure

The cash conversion cycle for Dril-Quip, Inc. has displayed fluctuations over the past five years. In 2023, the cash conversion cycle increased to 396.95 days compared to 379.19 days in 2022. This indicates that the company took longer to convert its investments in inventory and receivables into cash during 2023.

In 2021, the cash conversion cycle was 396.50 days, slightly lower than in 2023. However, in 2020, the cycle spiked to 493.53 days, reflecting a significant delay in the conversion of investments into cash. The company managed to improve its cash conversion efficiency in 2019 with a cycle of 414.76 days, although still higher compared to the more recent years.

Overall, the trend suggests variability in managing the company's liquidity and working capital efficiency. Dril-Quip should focus on optimizing its inventory management, accounts receivable collection, and accounts payable payment to reduce the cash conversion cycle, which is vital for maintaining healthy cash flows and operational sustainability.