Valaris Ltd (VAL)

The liquidity ratios of Valaris Ltd indicate the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, shows fluctuating trends over the reported periods. It declined sharply from June 2020 to September 2020, indicating potential liquidity concerns. However, the ratio improved significantly from December 2020 to June 2021, signaling a better ability to cover short-term obligations. The ratio remained relatively stable and above 2 from June 2021 to December 2023, suggesting a healthy liquidity position. However, there was a significant drop in the current ratio in the last reported period, indicating a potential reduction in the company's ability to cover short-term liabilities with current assets.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also shows fluctuations over the reported periods. A similar pattern is observed as with the current ratio, with a notable decline in liquidity from September 2023 to December 2023.

The cash ratio, which is the most conservative measure of liquidity as it considers only cash and cash equivalents, follows a similar trend as the quick ratio, indicating a decline in absolute liquidity from September 2023 to December 2023.

Overall, while Valaris Ltd showed periods of increased liquidity in the past, the most recent data suggests a potential challenge in maintaining the same level of liquidity going forward. It is important for the company to closely monitor its liquidity position to ensure it can meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. For Valaris Ltd, looking at the data provided over the past few years, there has been a significant fluctuation in the cash conversion cycle.

Starting from around 57-58 days in early 2020, the cycle gradually decreased to around 10 days by the end of 2021. This signifies a more efficient management of working capital during this period, as the company was able to optimize its inventory and receivables management processes.

In mid-2022, there was a sharp decrease in the cash conversion cycle to just about 6 days, which suggests a remarkable improvement in the company's ability to convert its resources into cash. However, this was followed by an increase towards the end of 2022 and early 2023, before dropping significantly to around 4 days by mid-2023.

Towards the end of 2023, there was a spike in the cash conversion cycle, possibly indicating challenges in managing working capital efficiently during that period. Subsequently, there was a notable improvement with the cycle dropping to zero days by early 2024. The cash conversion cycle then saw fluctuations in the latter part of 2024, with occasional spikes but ultimately returning to zero days by the end of the year.

Overall, the trend in Valaris Ltd's cash conversion cycle shows periods of fluctuations, indicating varying efficiency in managing working capital and converting resources into cash. It is crucial for the company to continue monitoring and optimizing its working capital management processes to ensure a healthy cash conversion cycle in the future.