KB Home (KBH)

The liquidity ratios of KB Home, as reflected in the provided data, indicate the company's ability to meet its short-term financial obligations and efficiently manage its cash resources.

1. Current Ratio: The current ratio measures KB Home's ability to cover its short-term liabilities with its current assets. From February 29, 2020, to November 30, 2024, the current ratio fluctuated between 0.05 and 1.00. The declining trend observed over the period indicates potential liquidity challenges as the ratio decreased from 0.55 to 0.26 in November 30, 2024.

2. Quick Ratio (Acid-Test Ratio): The quick ratio evaluates KB Home's ability to settle its current liabilities using its most liquid assets. The ratio ranged from 0.19 to 1.56 during the period. The decline in the quick ratio from 0.81 on May 31, 2020, to 0.42 on August 31, 2024, suggests a diminishing ability to cover immediate obligations with highly liquid assets.

3. Cash Ratio: The cash ratio assesses KB Home's capacity to meet short-term liabilities with cash and cash equivalents. The ratio varied from 0.19 to 1.56 over the analyzed period. This ratio reflects the company's ability to pay off its immediate debts solely using cash on hand. The increase in the cash ratio from 0.51 on February 29, 2020, to 1.56 on November 30, 2024, shows a positive trend in cash holding relative to current liabilities.

In summary, the liquidity ratios of KB Home illustrate a fluctuating trend over the period, with a general decrease in the ability to cover short-term obligations. The company should closely monitor and manage its liquidity position to ensure it can meet its financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle of KB Home demonstrates significant fluctuations over the observed period, suggesting varying efficiencies in managing its cash flow and working capital. Initially, the cycle was relatively stable, hovering around 350 days from February 2020 to August 2021. However, starting from November 2021, there was a substantial spike in the cash conversion cycle, reaching a peak of 22,303.48 days in August 2022.

This extreme increase indicates potential issues in efficiently converting sales and investments into cash during this period. It could imply challenges in collecting receivables, managing inventory, and paying off payables promptly. The company's prolonged cash conversion cycle could lead to cash flow constraints, increased financing costs, and overall liquidity concerns.

From August 2022 onwards, there was a notable decline in the cash conversion cycle, suggesting efforts to streamline working capital management and improve cash flow operations. While the cycle remains elevated compared to the earlier periods, the decreasing trend indicates progress in addressing cash conversion inefficiencies.

Overall, KB Home experienced significant fluctuations in its cash conversion cycle, highlighting the importance of continually monitoring and optimizing working capital processes to enhance cash flow management and financial performance.