Watsco Inc (WSO)
Cash ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash and cash equivalents | US$ in thousands | 210,112 | 147,505 | 118,268 | 146,067 | 74,454 |
| Short-term investments | US$ in thousands | — | — | — | 6,065 | — |
| Total current liabilities | US$ in thousands | 712,012 | 906,522 | 726,722 | 487,145 | 461,717 |
| Cash ratio | 0.30 | 0.16 | 0.16 | 0.31 | 0.16 |
December 31, 2023 calculation
Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($210,112K
+ $—K)
÷ $712,012K
= 0.30
The cash ratio measures a company's ability to cover its short-term liabilities using its cash and cash equivalents. Watsco Inc.'s cash ratio has fluctuated over the past five years. In 2023, the cash ratio improved to 0.35 from 0.20 in 2022 and 0.20 in 2021, indicating that the company had more cash available relative to its current liabilities.
The cash ratio of 0.35 in 2023 suggests that for every dollar of current liabilities, Watsco Inc. had $0.35 in cash and cash equivalents on hand. This implies a stronger liquidity position compared to the previous years. However, it is still important to note that the company may have limited financial flexibility in meeting its short-term obligations solely relying on cash.
The variation in the cash ratio over the years may reflect changes in the company's cash management practices, operating efficiency, or investment strategies. Investors and analysts would need to consider other financial metrics and factors to gain a comprehensive understanding of Watsco Inc.'s overall financial health and liquidity position.