Meritage Corporation (MTH)

The liquidity ratios of Meritage Homes Corp., as indicated by the current ratio, quick ratio, and cash ratio, show a consistent improvement over the past five years.

The current ratio measures the company's ability to meet its short-term obligations with its current assets. Meritage Homes Corp.'s current ratio has been gradually increasing, from 1.10 in 2019 to 1.75 in 2023. This implies that the company has a stronger ability to cover its short-term liabilities with its current assets.

Similarly, the quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, also demonstrates an improving trend for Meritage Homes Corp. The quick ratio has been consistently at 1.75 over the past five years, indicating that the company has a solid ability to meet its short-term obligations using its most liquid assets.

The cash ratio, which specifically focuses on the company's ability to cover its short-term liabilities with cash and cash equivalents, has also shown an upward trend. The cash ratio has increased from 0.86 in 2019 to 1.36 in 2023, reflecting a strengthening liquidity position for the company.

Overall, the liquidity ratios of Meritage Homes Corp. suggest that the company has been effectively managing its short-term liquidity needs and is in a better position to meet its obligations as they come due.

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Additional liquidity measure

The cash conversion cycle of Meritage Homes Corp. has shown improvement over the past five years, with the cycle decreasing from -10.20 days in 2019 to -5.58 days in 2023. A negative cash conversion cycle indicates that the company is able to collect cash from sales before paying its suppliers, which is a favorable position from a working capital management perspective.

The decreasing trend in the cash conversion cycle indicates that Meritage Homes Corp. has been able to optimize its working capital management, possibly by streamlining its operations, improving inventory turnover, and accelerating its collection of receivables. This efficiency in managing its cash conversion cycle suggests that the company is effectively balancing its cash inflows and outflows, ultimately contributing to its overall financial health.

By consistently reducing its cash conversion cycle over the years, Meritage Homes Corp. has demonstrated its ability to efficiently convert its resources into cash, which can help support its financial stability and growth prospects in the long run.