SM Energy Co (SM)

SM Energy Co's liquidity ratios show a mixed trend over the past few years. The current ratio has fluctuated significantly, starting at a relatively healthy 1.63 in March 2020, declining to a low of 0.26 in June 2021, and then gradually recovering to 1.29 in June 2024. This ratio indicates the company's ability to cover its short-term obligations with its current assets.

The quick ratio, which excludes inventory from current assets, remained at 0.00 for the first few periods, indicating a lack of highly liquid assets to cover immediate liabilities. However, it improved to 0.37 in December 2021 and further increased to 0.81 in June 2024. This shows that the company has started to build up more liquid assets to meet short-term obligations.

The cash ratio, which is the most conservative liquidity measure, also remained at 0.00 for the initial periods before increasing to 0.37 in December 2021 and reaching 0.81 in June 2024. This suggests that SM Energy Co has been strengthening its cash position over time, which is crucial for meeting immediate payment requirements.

Overall, while the current ratio has shown some improvement, the quick ratio and cash ratio indicate a positive shift towards a more liquid financial position for SM Energy Co in recent periods. However, the company should continue to monitor and manage its liquidity position to ensure it can meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of SM Energy Co, a measure of how long it takes for the company to convert its investments in inventory and other resources into cash flows from sales, has varied significantly over the periods provided.

From March 31, 2020, to June 30, 2020, there was a notable decline in the cash conversion cycle from 122.86 days to 58.93 days, indicating an improvement in the company's efficiency in managing its cash flows. This trend continued into September 30, 2020, with a further decrease to 37.47 days, and December 31, 2020, with a significant reduction to 9.68 days, signaling a more effective conversion of investments into cash.

During March 31, 2021, to September 30, 2021, the cash conversion cycle remained relatively low, hovering around 0.00 to 7.33 days, suggesting that the company was able to manage its working capital efficiently during this period. However, there was a slight increase in the cash conversion cycle by December 31, 2021, and more notably by March 31, 2022, indicating a potential slowdown in the conversion of assets into cash.

The cycle increased further through June 30, 2022, and September 30, 2022, suggesting possible challenges in the company's working capital management. By December 31, 2022, there was another significant increase in the cash conversion cycle, potentially indicating delays in the conversion of investments into cash.

The cycle experienced fluctuations during the following periods ending December 31, 2023. There was a subsequent decrease by March 31, 2024, to 0.00 days, reflecting potential improvements in working capital efficiency.

Overall, the cash conversion cycle of SM Energy Co has shown variability over time, with periods of improvement and challenges in managing its working capital effectively. Monitoring this metric can provide insights into the company's liquidity and operational efficiency.