Amazon.com Inc (AMZN)

Amazon.com Inc.'s liquidity ratios provide insight into its ability to meet short-term obligations and handle unexpected financial challenges. The current ratio, which measures the company's ability to pay its short-term obligations with its current assets, has shown some fluctuation over the past five years, ranging from 0.94 to 1.14. While the current ratio as of December 31, 2023, stands at 1.05, indicating that the company has $1.05 in current assets to cover every $1 in current liabilities, the trend suggests that Amazon's liquidity position has remained relatively stable.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also displayed variability, ranging from 0.72 to 0.91 over the same period. As of December 31, 2023, the quick ratio stands at 0.84, indicating that Amazon has $0.84 in highly liquid assets to cover each dollar of current liabilities. While the quick ratio is lower than the current ratio, it suggests that Amazon may face challenges in meeting its short-term obligations without relying on inventory.

The cash ratio, which provides the most conservative assessment of liquidity by considering only cash and cash equivalents, has followed a similar pattern of fluctuation over the past five years, ranging from 0.45 to 0.68. As of December 31, 2023, the cash ratio stands at 0.53, indicating that Amazon has $0.53 in cash and equivalents for every dollar of current liabilities. This suggests that the company may have limited immediate cash resources to settle its short-term obligations if necessary.

In summary, while Amazon.com Inc. has maintained relatively stable liquidity ratios over the past five years, with the current ratio remaining slightly above 1 and the quick ratio hovering below 1, the cash ratio indicates a more conservative liquidity position. Investors and stakeholders should continue monitoring these ratios to assess Amazon's ability to meet its short-term obligations and manage liquidity risks.

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See also:

Amazon.com Inc Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Amazon.com Inc. has exhibited a fluctuating trend over the past five years. The company's ability to efficiently convert its resources into cash has improved significantly from a high of -53.06 days in 2020 to -28.70 days in 2023. A negative cash conversion cycle indicates that Amazon is effectively managing its working capital, specifically in terms of inventory turnover, accounts receivable collection, and accounts payable payment.

The decreasing trend in the cash conversion cycle suggests that Amazon has been able to streamline its operations and enhance its liquidity management. The company has been able to reduce the time it takes to convert its investments in inventory and accounts receivable into cash, while also effectively managing its accounts payable.

Overall, the improvement in Amazon's cash conversion cycle indicates efficient management of its working capital and a more streamlined operational process, resulting in enhanced financial performance and liquidity.