Meritage Corporation (MTH)

Based on the provided data on Meritage Corporation's liquidity ratios, we can observe the following trends:

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets.
- Meritage Corporation's current ratio fluctuates over the years but generally stays above 1, indicating the company has more current assets than current liabilities.
- The ratio experienced significant variability, particularly at the end of 2023 and throughout 2024.
- The current ratio reached its highest point at 10.17 on September 30, 2024, indicating a strong ability to meet short-term obligations.
- However, the ratio dropped to 1.82 on September 30, 2023, suggesting potential liquidity challenges during that period.

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.
- Meritage Corporation's quick ratio shows fluctuations similar to the current ratio but generally remains above 1, indicating the company can cover its short-term obligations without relying on selling inventory.
- The ratio experienced a significant decline to 0.42 on both June 30, 2022, and September 30, 2022, indicating potential liquidity concerns during those periods.
- Similar to the current ratio, the quick ratio peaked at 3.07 on December 31, 2024, signaling strong liquidity.

3. Cash Ratio:
- The cash ratio measures a company's ability to cover its short-term liabilities using only its cash and cash equivalents.
- Meritage Corporation's cash ratio shows a pattern similar to the quick ratio, with fluctuations over time.
- Like the quick ratio, the cash ratio declined to 0.42 on both June 30, 2022, and September 30, 2022, highlighting potential cash flow challenges during those periods.
- The ratio peaked at 3.07 on December 31, 2024, indicating a strong cash position at the end of the year.

Overall, the analysis of Meritage Corporation's liquidity ratios suggests that while the company generally maintains a healthy liquidity position, there are periods of fluctuation that may indicate potential liquidity challenges. Monitoring these ratios regularly can help assess the company's ability to meet its short-term obligations and manage cash flow effectively.

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Additional liquidity measure

The cash conversion cycle of Meritage Corporation has shown fluctuations over the period under review. The trend indicates a general increase in the number of days it takes for the company to convert its investments in inventory and other resources into cash received from sales.

The cycle started at 327.54 days on March 31, 2020, and decreased gradually to 287.22 days by December 31, 2020. This decline suggests an improvement in the efficiency of the company's working capital management during these quarters.

However, from March 31, 2021, the cycle lengthened, reaching a peak of 437.08 days by December 31, 2024. This significant increase indicates potential inefficiencies in the management of cash flows and working capital during this later period.

It is important for Meritage Corporation to closely monitor its cash conversion cycle and identify strategies to optimize its working capital management, streamline operations, and improve the efficiency of its cash flows to prevent potential liquidity issues.