Amazon.com Inc (AMZN)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.06 | 1.05 | 0.94 | 1.14 | 1.05 |
| Quick ratio | 0.87 | 0.84 | 0.72 | 0.91 | 0.86 |
| Cash ratio | 0.56 | 0.53 | 0.45 | 0.68 | 0.67 |
Based on the provided data for Amazon.com Inc's liquidity ratios, we observe the following trends:
1. Current Ratio: The current ratio measures the company's ability to cover its short-term obligations with its current assets. Amazon's current ratio has fluctuated over the years but generally remained close to or above 1, indicating that the company has sufficient current assets to meet its current liabilities.
2. Quick Ratio: The quick ratio, or acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Amazon's quick ratio has also exhibited variability but has generally been below 1, suggesting that the company may have difficulty meeting its short-term obligations without relying on inventory.
3. Cash Ratio: The cash ratio indicates the proportion of a company's current assets held in cash or cash equivalents to cover its current liabilities. Amazon's cash ratio has shown a declining trend, indicating that the company may have less cash on hand relative to its current liabilities over the years.
Overall, while Amazon's current ratio has generally been satisfactory, its quick ratio and cash ratio suggest a potential liquidity risk in terms of covering short-term obligations without relying on inventory or having sufficient cash reserves. It would be important for the company to closely monitor its liquidity position and possibly consider strategies to improve its quick ratio and increase its cash reserves for greater financial flexibility.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -22.10 | -15.26 | -14.09 | -23.60 | -39.81 |
The cash conversion cycle is a crucial metric in assessing a company's operational efficiency and financial management. Looking at the data provided for Amazon.com Inc, we observe a consistent improvement in its cash conversion cycle over the years, reflecting a more efficient management of working capital.
As of December 31, 2020, Amazon had a negative cash conversion cycle of -39.81 days, indicating that the company was able to convert its inventory and receivables into cash quickly, potentially benefiting from favorable credit terms from suppliers and efficient collection of receivables.
Subsequently, in the following years, the cash conversion cycle continued to decrease, reaching -23.60 days by December 31, 2021, -14.09 days by December 31, 2022, -15.26 days by December 31, 2023, and -22.10 days by December 31, 2024. This trend suggests that Amazon has been able to further optimize its working capital management processes, leading to a shorter time taken to convert investments in inventory and receivables into cash inflows.
Overall, the consistent decline in the cash conversion cycle demonstrates Amazon's effectiveness in managing its liquidity and working capital efficiently, which can positively impact its financial performance and competitiveness in the market.