Hilton Grand Vacations Inc (HGV)

The liquidity ratios of Hilton Grand Vacations Inc indicate the company's ability to meet its short-term obligations and manage its current financial commitments.

1. Current Ratio:
- The current ratio measures the company's ability to pay its short-term obligations with its current assets.
- In 2020, the current ratio was exceptionally high at 34.19, indicating a strong ability to cover short-term liabilities.
- However, there was a significant decrease in this ratio in 2021 to 6.55, which might imply reduced liquidity compared to the previous year.
- The ratio further declined in 2022 to 0.61, indicating potential difficulties in meeting short-term obligations.
- The ratio improved in 2023 to 3.11, suggesting a better ability to cover short-term liabilities.
- By 2024, the current ratio increased significantly to 15.35, indicating a more favorable liquidity position compared to the previous years.

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.
- Similar to the current ratio, the quick ratio saw a notable decrease from 2020 to 2021.
- In 2020, the quick ratio was at the same level as the current ratio, at 34.19, showing strong liquidity.
- However, in 2021, the quick ratio decreased to 6.57, indicating a drop in the ability to cover short-term obligations more immediately.
- The ratio improved gradually in the following years, reaching 2.55 in 2024, suggesting a more stable liquidity position.

3. Cash Ratio:
- The cash ratio focuses solely on a company's ability to cover its short-term liabilities using only cash and cash equivalents.
- Hilton Grand Vacations Inc had a relatively high cash ratio of 26.75 in 2020, indicating a strong capacity to settle short-term obligations with cash on hand.
- There was a significant decline in the cash ratio in 2021 to 3.88, which may suggest a reduction in the company's immediate liquidity.
- The ratio continued to decrease in 2022 to 0.25, indicating a potential strain on the company's ability to cover short-term obligations with cash.
- However, the cash ratio improved in the following years, reaching 1.30 in 2024, which may signify an enhanced ability to meet short-term liabilities with available cash resources.

In summary, the liquidity ratios of Hilton Grand Vacations Inc experienced fluctuations over the period analyzed, with varying levels of short-term liquidity. The improving trend in the later years indicates a strengthening liquidity position, but attention should be given to the significant drops observed in 2021 and 2022 to ensure adequate liquidity management in the future.

---

Additional liquidity measure

The cash conversion cycle of Hilton Grand Vacations Inc has shown fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was 48.59 days, indicating a reasonable time frame for converting its investments in inventory and accounts receivable into cash.

By December 31, 2021, the cash conversion cycle improved slightly to 47.21 days, indicating a more efficient management of working capital. However, in the following years, there was a significant increase in the cash conversion cycle to 1,053.47 days as of December 31, 2022, and 1,008.85 days as of December 31, 2023.

This sudden spike in the cash conversion cycle suggests possible issues with managing inventory, collecting receivables, or extending payment terms to suppliers. Such a prolonged cycle can tie up cash, impacting liquidity and operational efficiency.

As of December 31, 2024, there was a notable improvement in the cash conversion cycle to 817.52 days, which may indicate efforts to address the inefficiencies in working capital management. It is essential for Hilton Grand Vacations Inc to closely monitor and optimize its cash conversion cycle to ensure smooth operations and sustainable financial performance.