SM Energy Co (SM)

Based on the liquidity ratios of SM Energy Co provided in the data, we can observe the following trends:

1. Current Ratio: The current ratio measures the company's ability to cover its short-term obligations with its current assets. SM Energy Co's current ratio has shown significant improvement over the years, increasing from 0.35 in 2020 to 1.45 in 2023 before dropping slightly to 1.23 in 2022 and 0.55 in 2024. Generally, a current ratio above 1 indicates that a company can cover its current liabilities with its current assets.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. SM Energy Co's quick ratio has also shown an improving trend, starting from 0.00 in 2020 to 0.97 in 2023. However, it decreased to 0.74 in 2022 and 2024. A quick ratio of 1 or higher is typically considered favorable as it indicates the company can meet its short-term liabilities without relying on selling inventory.

3. Cash Ratio: The cash ratio focuses solely on the company's ability to cover its current liabilities with its cash and cash equivalents. The cash ratio for SM Energy Co has followed a similar trend to the quick ratio, starting from 0.00 in 2020 to 0.97 in 2023, although it dipped to 0.74 in 2022 and 2024. A higher cash ratio indicates a stronger ability to cover short-term obligations with cash on hand.

Overall, while SM Energy Co has shown an improvement in its liquidity position over the years, there have been fluctuations in the ratios from year to year. It is essential for the company to maintain adequate liquidity to meet its short-term obligations and fund its operations effectively.

---

Additional liquidity measure

The cash conversion cycle (CCC) for SM Energy Co has shown fluctuations over the years based on the provided data.

As of December 31, 2020, the CCC was 9.68 days, indicating that the company took approximately 9.68 days to convert its resources into cash. This metric improved by the end of 2021, with the CCC lowering to 6.87 days, suggesting more efficient cash conversion.

However, there was a significant increase in the CCC by the end of 2022, reaching 14.51 days. This indicates that the company took longer to convert its investments into cash during that period. The trend continued into 2023, with the CCC growing to 16.43 days, reflecting potential challenges in converting its assets into cash within a shorter timeframe.

Interestingly, by the end of 2024, the CCC dropped to 0.00 days, which could be an anomaly or may have resulted from specific operational or financial strategies employed by the company during that period.

Overall, fluctuations in the cash conversion cycle can provide insights into the efficiency of SM Energy Co's operations and its ability to manage working capital effectively. Further analysis would be required to understand the factors driving these changes and their implications for the company's financial performance.