Ovintiv Inc (OVV)

Ovintiv Inc's liquidity ratios indicate the company's ability to meet its short-term obligations. The current ratio, which measures the company's ability to cover its current liabilities with current assets, has shown a slight improvement over the years from 0.51 in 2020 to 0.61 in 2022 before declining to 0.51 in 2024. While the current ratio has increased overall, the ratio remains below 1, suggesting that Ovintiv may have difficulty meeting its short-term obligations with its current assets alone.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has fluctuated over the years but generally remained low. The ratio improved in 2021 to 0.10 but fell back to 0.02 in subsequent years. This indicates that the company may have limited ability to meet its short-term obligations using its most liquid assets.

Similarly, the cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has shown a similar trend to the quick ratio. Ovintiv's cash ratio improved in 2021 to 0.10 but then declined to 0.02 in the following years, indicating a potential liquidity challenge relying solely on cash reserves to meet immediate obligations.

Overall, the liquidity ratios suggest that Ovintiv Inc may face challenges in meeting its short-term obligations using its current assets and cash reserves alone. Investors and creditors should monitor these ratios closely to assess the company's liquidity position and financial health.

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Additional liquidity measure

The cash conversion cycle of Ovintiv Inc has shown a significant improvement over the years. In December 31, 2020, the cash conversion cycle stood at 2.49 days, indicating that the company took approximately 2.49 days to convert its investments in inventory and other resources back into cash.

By December 31, 2021, the cash conversion cycle decreased to 0.74 days, demonstrating a substantial reduction in the time taken by Ovintiv Inc to convert its resources into cash, which signifies a more efficient operational performance.

Moreover, from December 31, 2022 onwards, the cash conversion cycle dropped to 0.00 days, which suggests that Ovintiv Inc effectively managed its working capital, inventory, and accounts receivable, resulting in an almost instantaneous conversion of resources into cash.

This trend indicates that Ovintiv Inc has streamlined its operations, improved its liquidity position, and optimized its cash flow management processes over the years. Such a swift cash conversion cycle is a positive indicator of the company's operational efficiency and financial health.