PulteGroup Inc (PHM)

PulteGroup Inc's liquidity ratios show a general trend of decline over the years based on the provided data.

1. Current ratio:
- The current ratio measures the company's ability to meet short-term obligations with its current assets.
- PulteGroup's current ratio has decreased from a high of 30.56 in 2020 to 12.02 in 2022, indicating a significant decrease in liquidity over time.
- Although there has been a slight improvement in 2023 and 2024, the current ratio remains below the levels seen in the previous years.

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.
- PulteGroup's quick ratio has followed a similar downward trend, declining from 37.24 in 2020 to 19.91 in 2024.
- This suggests that the company may be facing challenges in meeting its short-term obligations without relying on inventory.

3. Cash ratio:
- The cash ratio is the most conservative liquidity measure, focusing only on the company's ability to cover its current liabilities with cash and cash equivalents.
- PulteGroup's cash ratio mirrors the trend seen in the current and quick ratios, decreasing from 37.24 in 2020 to 19.91 in 2024.
- The declining cash ratio indicates a reduced capacity to pay off immediate obligations solely with cash reserves.

In summary, PulteGroup Inc's liquidity position has weakened over the years, as reflected in the decreasing current, quick, and cash ratios. This may suggest a potential need for the company to improve its cash management and liquidity management strategies to ensure its ongoing financial stability and meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of PulteGroup Inc has shown an increasing trend over the last five years. As of December 31, 2020, the cash conversion cycle was 2,475.98 days, which increased to 3,124.55 days by December 31, 2024.

This indicates that PulteGroup Inc takes longer to convert its investments in inventory and other resources into cash receipts from customers. A longer cash conversion cycle can tie up cash resources and potentially indicate inefficiencies in inventory management or sales collection processes.

The trend of increasing cash conversion cycle may raise concerns about the company's liquidity and operational efficiency. It is important for PulteGroup Inc to closely monitor and manage its cash conversion cycle to ensure it remains at a healthy level and does not negatively impact the company's financial performance.