NOV Inc. (NOV)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.46 | 2.40 | 2.25 | 2.57 | 2.79 |
| Quick ratio | 0.52 | 0.34 | 0.44 | 0.83 | 0.93 |
| Cash ratio | 0.52 | 0.34 | 0.44 | 0.83 | 0.93 |
NOV Inc.'s current ratio has shown a declining trend from 2.79 in December 2020 to 2.46 in December 2024. The current ratio measures the company's ability to cover its short-term obligations with its current assets. Although the current ratio remains above 1, indicating that NOV Inc. has more current assets than current liabilities, the decreasing trend suggests potential challenges in meeting short-term obligations.
Additionally, the quick ratio, also known as the acid-test ratio, has shown a significant decrease from 0.93 in December 2020 to 0.52 in December 2024. This ratio excludes inventory from current assets, providing a more stringent measure of liquidity. The declining quick ratio indicates a decreasing ability of NOV Inc. to meet its short-term liabilities using the most liquid assets.
Lastly, the cash ratio, which assesses the company's ability to pay off its current liabilities using only its cash and cash equivalents, has followed a similar downward trend from 0.93 in December 2020 to 0.52 in December 2024. This declining trend suggests that NOV Inc. may have a reduced capacity to cover its short-term obligations solely with its cash reserves.
Overall, the liquidity ratios of NOV Inc. show a decreasing trend over the years, raising concerns about the company's ability to meet its short-term obligations with its current, liquid assets. It would be important for NOV Inc. to closely monitor its liquidity position and take appropriate measures to improve its liquidity ratios in the future.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 102.80 | 116.31 | 112.10 | 102.28 | 90.86 |
The cash conversion cycle is a measure that assesses how efficiently a company manages its cash flow by evaluating the time it takes to convert its investments in inventory and other resources back into cash.
Analyzing NOV Inc.'s cash conversion cycle over the years, we observe a trend of increasing days from 90.86 days at the end of 2020 to 102.28 days at the end of 2021, further rising to 112.10 days by the end of 2022. This indicates a potential inefficiency in the company's cash management practices during these periods.
However, there was a slight decrease in the cash conversion cycle at the end of 2023 to 116.31 days, which may suggest some improvement in managing cash flow. This improvement was followed by a significant decrease to 102.80 days by the end of 2024, approaching the level observed at the end of 2021.
Overall, NOV Inc.'s cash conversion cycle has shown fluctuations over the years, reflecting varying levels of effectiveness in managing cash flow and the conversion of investments into cash. It is essential for the company to continue monitoring and optimizing its cash conversion cycle to ensure efficient utilization of resources and maximize liquidity.