Texas Pacific Land Trust (TPL)

The liquidity ratios of Texas Pacific Land Trust, namely the current ratio, quick ratio, and cash ratio, have shown fluctuations over the past several quarters.

The current ratio, which measures the firm's ability to cover its short-term liabilities with its current assets, has been consistently above 1, indicating a strong short-term liquidity position. The ratio peaked at 19.43 in December 2023 and has generally trended downwards since then, but remained at healthy levels throughout.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. Similar to the current ratio, the quick ratio has also demonstrated a strong liquidity position for Texas Pacific Land Trust. However, it has shown slightly more variability compared to the current ratio.

The cash ratio, which focuses solely on the firm's ability to cover its short-term liabilities with cash and cash equivalents, has followed a similar pattern to the quick ratio. This ratio provides insight into the immediate liquidity available to the company without relying on other current assets.

Overall, Texas Pacific Land Trust has maintained solid liquidity ratios, with all three ratios consistently above industry norms. This indicates that the company is well-positioned to meet its short-term obligations and demonstrates its financial stability and ability to manage liquidity effectively. It will be important to continue monitoring these ratios to ensure the company's liquidity remains strong in the future.

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Additional liquidity measure

The cash conversion cycle (CCC) of Texas Pacific Land Trust has displayed significant fluctuations over the past few quarters. In the latest quarter, as of March 31, 2024, the CCC was noted to be at 0.00 days, indicating an efficient management of cash and working capital. This sharp improvement from the previous quarter suggests an effective conversion of investments in inventory and receivables into cash.

Conversely, in the preceding quarters, Texas Pacific Land Trust experienced relatively higher cash conversion cycles. For instance, in the third quarter of 2023, the CCC soared to 541.09 days, reaching even higher levels in subsequent quarters, peaking at 675.73 days in the third quarter of 2021. These extended cycles indicate a prolonged duration taken to convert investments in inventory and receivables into cash, potentially attributed to challenges in collection of receivables or delays in inventory turnover.

Overall, Texas Pacific Land Trust has shown fluctuations in its cash conversion cycle, with the latest quarter reflecting a significant improvement in efficiency. Continued monitoring of the CCC will be essential to assess the company's effectiveness in managing its working capital and cash flow in the future.