Valero Energy Corporation (VLO)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.53 | 1.56 | 1.38 | 1.26 | 1.71 |
| Quick ratio | 0.30 | 0.33 | 0.28 | 0.24 | 0.36 |
| Cash ratio | 0.30 | 0.33 | 0.28 | 0.24 | 0.36 |
Based on the provided data, Valero Energy Corporation's liquidity ratios show a fluctuating trend over the years analyzed.
The current ratio, a measure of the company's ability to cover its short-term liabilities with its current assets, decreased from 1.71 in December 31, 2020, to 1.26 in December 31, 2021. However, it improved in the following years, reaching 1.56 in December 31, 2023, and then slightly declined to 1.53 in December 31, 2024. A current ratio above 1 indicates that Valero Energy Corporation has more current assets than current liabilities.
The quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, exhibited a similar decreasing trend from 0.36 in December 31, 2020, to 0.24 in December 31, 2021. It also saw an improvement in the subsequent years, with a peak of 0.33 in December 31, 2023, before declining slightly to 0.30 in December 31, 2024. A quick ratio below 1 may indicate potential difficulty in meeting short-term obligations without relying on inventory.
Lastly, the cash ratio, which focuses solely on the ability to cover short-term liabilities with cash and cash equivalents, mirrored the trend seen in the quick ratio. It decreased from 0.36 in December 31, 2020, to 0.24 in December 31, 2021, but later increased to 0.33 in December 31, 2023, before falling to 0.30 in December 31, 2024. A higher cash ratio implies a stronger ability to cover immediate obligations with cash on hand.
In conclusion, while there have been fluctuations in Valero Energy Corporation's liquidity ratios over the years, the company generally maintains a satisfactory level of liquidity to meet its short-term obligations. However, it is important for the company to monitor and manage its liquidity position continuously to ensure financial stability and agility in the dynamic business environment.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 22.64 | 20.99 | 15.44 | 20.62 | 33.54 |
The cash conversion cycle for Valero Energy Corporation has shown a trend of improvement over the past five years, indicating enhanced efficiency in managing its working capital. As of December 31, 2020, the company's cash conversion cycle stood at 33.54 days, which reduced to 20.62 days by December 31, 2021, reflecting a significant decrease. By the end of 2022, the cycle further improved to 15.44 days, showcasing a continued focus on streamlining cash flows.
However, there was a slight increase in the cash conversion cycle to 20.99 days by December 31, 2023, which may warrant monitoring to ensure the efficiency gains are sustained. By the end of 2024, the cycle increased slightly to 22.64 days, signifying the need for continued attention to working capital management practices.
Overall, Valero Energy Corporation has demonstrated a positive trend in its cash conversion cycle, indicating effective management of operating liquidity and the ability to convert investments in inventory and receivables into cash efficiently. Maintaining a low and stable cash conversion cycle is essential for optimizing working capital and supporting the company's financial health.