Dropbox Inc (DBX)

Dropbox Inc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, provide insight into the company's ability to meet its short-term obligations.

The current ratio has shown some fluctuations over the past five years, with a decreasing trend from 1.57 in 2021 to 1.26 in 2023. This ratio indicates that Dropbox Inc had $1.26 in current assets for every $1 in current liabilities at the end of 2023. While the current ratio remained above 1, suggesting the company had sufficient current assets to cover its short-term debts, the slight decline may signal a potential decrease in liquidity over time.

Similarly, the quick ratio, also known as the acid-test ratio, remained consistent at 1.26 from 2021 to 2023. This ratio measures the company's ability to meet its short-term obligations using only its most liquid assets, excluding inventory. The consistent quick ratio indicates that Dropbox Inc has maintained a stable level of liquidity over these years.

The cash ratio, which specifically focuses on the company's ability to cover its current liabilities with cash and cash equivalents, also shows a declining trend from 1.53 in 2021 to 1.21 in 2023. This suggests that the company may have relatively less cash on hand compared to its current liabilities, potentially impacting its ability to settle short-term debts solely with cash reserves.

Overall, while Dropbox Inc's liquidity ratios demonstrate varying levels of liquidity over the past five years, the company has generally maintained a sufficient level of current assets to cover short-term obligations. However, the declining trend in some ratios, particularly the current ratio and cash ratio, warrants further monitoring to ensure the company's continued ability to meet its short-term financial commitments.

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Additional liquidity measure

Dropbox Inc's cash conversion cycle has shown fluctuation over the past five years. In 2023, the company's cash conversion cycle improved to -19.34 days compared to -23.27 days in 2022. This indicates that in 2023, Dropbox took less time to convert its investments in inventory and accounts receivable into cash.

Compared to 2021, the cash conversion cycle increased in 2022, suggesting a potential inefficiency in managing its working capital. However, the company managed to improve its cash conversion cycle significantly from 2020 to 2021, resulting in -12.73 days in 2021 compared to -8.19 days in 2020.

The cash conversion cycle was notably negative throughout the years, which could imply that Dropbox was able to collect cash from its sales before paying its suppliers, allowing for efficient cash flow management.

Overall, the trend in Dropbox Inc's cash conversion cycle suggests a general improvement in the efficiency of its working capital management in recent years, indicating a more effective conversion of investments into cash. This could be a positive sign for the company's financial health and operational performance.