NVR Inc (NVR)

NVR Inc's liquidity ratios indicate its ability to meet short-term financial obligations and operational needs.

The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has shown a positive trend over the years. Starting at 3.33 in December 31, 2020, it increased to 5.95 by December 31, 2021, and remained relatively high at 5.64 by December 31, 2022. However, there was a slight decrease to 4.25 by December 31, 2023, and a significant spike to 17.54 by December 31, 2024. This indicates that NVR Inc has ample current assets to cover its short-term liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, shows a similar trend to the current ratio, though slightly lower. It started at 3.33 in December 31, 2020, and decreased slightly to 3.20 by December 31, 2021, and continued to decline to 3.09 by December 31, 2022. By December 31, 2023, the quick ratio further decreased to 2.67 but significantly rose to 8.01 by December 31, 2024. This indicates a strong ability to meet short-term obligations without relying on inventory liquidation.

The cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, shows consistent values with the quick ratio. It started at 3.33 on December 31, 2020, and followed a similar decreasing trend, reaching 2.67 by December 31, 2023. By December 31, 2024, the cash ratio increased significantly to 8.01, indicating a substantial cash position relative to current liabilities.

Overall, the liquidity ratios of NVR Inc suggest a solid liquidity position, with a strong ability to meet its short-term obligations and operational needs. However, the significant increase in the current ratio and cash ratio in 2024 may require further investigation to understand the underlying reasons for such a spike.

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Additional liquidity measure

The cash conversion cycle for NVR Inc has exhibited some fluctuations over the years. Starting at 17,224.35 days in December 2020, it increased to 19,569.67 days by December 2021. However, in December 2022, there was a noticeable improvement as the cycle decreased to 16,786.83 days, signifying a positive trend. Subsequently, by December 2023, the cycle increased again to 19,021.53 days. The most significant change occurred in December 2024, with a drastic spike to 148,006.53 days, which may indicate potential issues in managing working capital efficiency during that period. Further analysis would be required to understand the reasons behind such a substantial deviation and its impact on the company's operations and financial health.