Cactus Inc (WHD)

Cactus Inc's liquidity ratios, namely the current ratio, quick ratio, and cash ratio, highlight the company's ability to meet its short-term obligations. The current ratio, which measures the firm's ability to cover its current liabilities with current assets, has fluctuated over the years but generally remains at a healthy level. In 2023, the current ratio stood at 3.17, indicating that Cactus Inc had $3.17 in current assets for every $1 of current liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also demonstrates a strong liquidity position for Cactus Inc. In 2023, the quick ratio was 2.08, suggesting that the company had $2.08 in highly liquid assets (excluding inventory) available to cover each dollar of current liabilities.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, further reinforces Cactus Inc's ability to meet short-term obligations. Although the cash ratio has decreased from 2022 to 2023, it still stood at a respectable 0.76 in 2023, indicating that the company had $0.76 in cash and cash equivalents for every dollar of current liabilities.

Overall, Cactus Inc's liquidity ratios suggest that the company has a strong financial position and should be able to handle its short-term financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle of Cactus Inc has shown fluctuating trends over the past five years. In 2023, the company's cash conversion cycle decreased significantly to 322.91 days from 535.57 days in 2022. This indicates that Cactus Inc has improved its efficiency in managing cash flows and working capital in the most recent year.

Looking further back, the cash conversion cycle was 486.84 days in 2021, 417.89 days in 2020, and 434.63 days in 2019. These figures suggest that the company's cash conversion cycle has been somewhat inconsistent over the last five years, with fluctuations in the efficiency of converting inventory and receivables into cash.

The decreasing trend from 2022 to 2023 is a positive sign as it indicates that Cactus Inc is potentially managing its inventory, accounts receivable, and accounts payable more effectively. However, it would be important for the company to continue focusing on optimizing its working capital management to ensure sustained efficiency in cash conversion going forward.