Watsco Inc (WSO)
Cash ratio
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | US$ in thousands | 210,112 | 175,022 | 162,526 | 140,955 | 147,505 | 130,228 | 129,049 | 110,607 | 118,268 | 137,201 | 96,787 | 93,875 | 146,067 | 92,600 | 79,573 | 51,236 | 74,454 | 60,150 | 55,915 | 77,273 |
| Short-term investments | US$ in thousands | — | — | — | — | — | — | — | — | — | 1,750 | 1,579 | 1,412 | 6,065 | 103,355 | — | — | — | — | — | — |
| Total current liabilities | US$ in thousands | 712,012 | 887,628 | 955,999 | 953,083 | 906,522 | 939,522 | 1,061,340 | 836,839 | 726,722 | 796,693 | 815,264 | 630,820 | 487,145 | 609,498 | 638,858 | 520,474 | 461,717 | 542,288 | 580,518 | 469,773 |
| Cash ratio | 0.30 | 0.20 | 0.17 | 0.15 | 0.16 | 0.14 | 0.12 | 0.13 | 0.16 | 0.17 | 0.12 | 0.15 | 0.31 | 0.32 | 0.12 | 0.10 | 0.16 | 0.11 | 0.10 | 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 is a financial metric that measures a company's ability to cover its short-term liabilities using its cash and cash equivalents. It is calculated by dividing the company's cash and cash equivalents by its current liabilities.
Looking at the data provided for Watsco Inc.'s cash ratio over the past eight quarters, we can see a fluctuating trend. The cash ratio has ranged from a low of 0.15 in Q2 2022 to a high of 0.35 in Q4 2023.
A higher cash ratio indicates that a company has more liquid assets readily available to cover its short-term obligations, suggesting a stronger financial position. Conversely, a lower cash ratio may imply that the company may struggle to meet its short-term liabilities using its current cash resources alone.
In the case of Watsco Inc., we observe that the cash ratio has generally increased over the past two years, reaching its peak in Q4 2023. This upward trend indicates an improvement in the company's liquidity position and its ability to meet short-term obligations with its available cash reserves.
It is essential for investors and analysts to monitor the cash ratio over time to assess the company's liquidity risk and financial health. While a high cash ratio may signify conservative financial management, excessively high levels of cash relative to current liabilities could suggest underutilization of resources. On the other hand, a consistently low cash ratio may raise concerns about the company's ability to manage its short-term obligations effectively.