Cactus Inc (WHD)

Cactus Inc's liquidity ratios demonstrate fluctuations over the years under review. The company's current ratio, which measures its ability to cover short-term obligations with current assets, decreased from 8.69 in 2020 to 5.60 in 2021 and continued to decline to 3.17 in 2023 before slightly rebounding to 4.33 in 2024. This indicates a decreasing trend in the company's ability to meet short-term obligations using its current assets.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also declined over the years. It dropped from 5.90 in 2020 to 3.26 in 2021 and further decreased to 0.76 in 2023 before improving to 1.92 in 2024. This declining quick ratio implies potential challenges in the company's ability to meet immediate obligations without relying on selling inventory.

Lastly, the cash ratio, which specifies the firm's ability to cover short-term liabilities with its cash and cash equivalents, demonstrated a pattern similar to the quick ratio. The cash ratio decreased from 5.90 in 2020 to 3.26 in 2021 and hit its lowest point at 0.76 in 2023 before rising to 1.92 in 2024. This suggests a potential strain on the company's cash liquidity in recent years, although there was some improvement in 2024.

Overall, Cactus Inc's liquidity ratios indicate a need for management to closely monitor and potentially improve the company's ability to meet short-term obligations, given the downward trend observed in recent years. It may be prudent for the company to assess its current asset management and working capital practices to enhance liquidity and mitigate potential liquidity risks.

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Additional liquidity measure

The cash conversion cycle of Cactus Inc has been fluctuating over the past five years. In 2020, it was 134.76 days, slightly increasing to 137.90 days in 2021. However, there was a significant improvement in 2022, dropping to 132.02 days. The trend continued positively in 2023, with the cash conversion cycle further decreasing to 108.67 days. In 2024, there was a slight increase to 119.38 days, but overall, Cactus Inc has effectively managed its cash conversion cycle in recent years, indicating improved efficiency in converting its investments in inventory and accounts receivable into cash.