PulteGroup Inc (PHM)

PulteGroup Inc's liquidity ratios have shown varying trends over the past five years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has generally been above 3, indicating a strong liquidity position. The ratio reached its peak in 2023 at 4.36, showing an improvement in the company's ability to meet its short-term debt obligations.

On the other hand, the quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, has fluctuated more significantly. The ratio was lowest in 2022 at 0.63, suggesting a decrease in the company's ability to cover its short-term liabilities with its most liquid assets. However, the ratio increased in 2023 to 0.84, but still remains below 1, indicating potential concerns about the company's ability to meet its current obligations without relying on inventory.

The cash ratio, which is the most stringent measure of liquidity as it only considers cash and cash equivalents, has also exhibited fluctuations. The ratio was highest in 2020 at 1.22, signaling a strong ability to cover short-term liabilities with cash on hand. However, the ratio decreased in 2023 to 0.77, indicating a reduced ability to meet short-term obligations solely with cash reserves.

Overall, while PulteGroup Inc has generally maintained a strong current ratio above 3 in the past five years, the decreasing trend in quick and cash ratios in recent years may suggest potential challenges in meeting short-term obligations without relying on inventory or cash reserves. Further analysis of the company's cash management practices and working capital efficiency may be warranted to ensure sustained liquidity in the future.

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Additional liquidity measure

The cash conversion cycle of PulteGroup Inc has shown some fluctuations over the past five years. In 2023, the cash conversion cycle was 365.03 days, indicating that it took the company approximately one year to convert its investments in inventory and accounts receivable into cash. This represents an increase compared to the previous year, where the cycle was 350.55 days.

Looking at the trend from 2021 to 2023, there was a gradual increase in the cash conversion cycle, with the cycle peaking in 2023. This deterioration suggests that the company may be facing challenges in managing its inventory, collecting receivables, or optimizing its cash flow processes.

Comparing the current cycle to the base year of 2019, where the cycle was 349.71 days, there has been a slight improvement in 2023. However, it is essential to note that the 2023 cycle is still higher than the cycles in 2021 and 2020.

Overall, PulteGroup Inc's cash conversion cycle has seen fluctuations, with a notable increase in 2023. Management should continue to focus on improving working capital management practices to potentially shorten the cash conversion cycle and enhance the company's overall liquidity position.