LGI Homes (LGIH)

Cash ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cash and cash equivalents	US$ in thousands	48,978	31,998	50,514	35,942	38,345
Short-term investments	US$ in thousands	—	—	—	—	—
Total current liabilities	US$ in thousands	235,484	365,415	150,781	148,684	130,363
Cash ratio		0.21	0.09	0.34	0.24	0.29

December 31, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($48,978K + $—K) ÷ $235,484K
= 0.21

The cash ratio for LGI Homes Inc has fluctuated over the past five years. In 2023, the cash ratio stood at 0.17, indicating that the company had $0.17 of cash and cash equivalents for every $1 of current liabilities. This represented an improvement compared to 2022 when the ratio was 0.09. However, it was lower than the ratios observed in 2021, 2020, and 2019 which were 0.37, 0.26, and 0.36 respectively.

The cash ratio measures a company's ability to cover its short-term liabilities with its readily available cash and cash equivalents. While an increasing trend in the cash ratio is generally positive as it implies improved liquidity, it is important to note that a very high cash ratio may also indicate that the company is not efficiently deploying its excess cash. Therefore, LGI Homes Inc should continue to monitor its cash ratio and strive to maintain a balance between liquidity and efficient use of cash resources.