Now Inc (DNOW)

Based on the provided data, the liquidity ratios of Now Inc have shown some fluctuations over the years.

1. Current Ratio: The current ratio measures the company's ability to meet its short-term obligations with its current assets. Now Inc's current ratio has declined from 3.17 in 2020 to 2.33 in 2024. This indicates that the company may have reduced its current assets relative to its current liabilities over the years, but it still has more than enough current assets to cover its short-term liabilities.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Now Inc's quick ratio has also shown a decreasing trend from 1.42 in 2020 to 0.58 in 2024. This implies that the company may be relying more on inventory to meet its short-term obligations, which could be a cause for concern as inventory may not always be easily convertible to cash.

3. Cash Ratio: The cash ratio is the most conservative liquidity ratio as it only considers cash and cash equivalents to cover current liabilities. Now Inc's cash ratio has followed a similar trend as the quick ratio, decreasing from 1.42 in 2020 to 0.58 in 2024. This indicates that the company's ability to meet short-term obligations solely with cash has weakened over the years.

In summary, Now Inc's liquidity ratios have shown a decline over the years, particularly in the quick and cash ratios, signaling a potential weakening ability to meet short-term obligations without relying heavily on inventory. It would be advisable for the company to closely monitor its liquidity position and take necessary steps to improve it, such as managing inventory levels more effectively or increasing cash reserves.

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Additional liquidity measure

The cash conversion cycle for Now Inc has shown some fluctuations over the past five years. In December 2020, the company's cash conversion cycle was 72.06 days, indicating the average number of days it takes for Now Inc to convert its investments in inventory and other resources into cash flows from sales.

By December 2021, the cash conversion cycle decreased slightly to 71.57 days, suggesting an improvement in the efficiency of Now Inc's working capital management. However, in December 2022, the cash conversion cycle increased to 85.32 days, signaling a potential delay in the conversion of investments into cash.

The following year, by December 2023, the cash conversion cycle decreased to 74.80 days, but it remained higher compared to the levels seen in the previous years. Finally, by December 2024, Now Inc managed to lower its cash conversion cycle to 69.90 days, indicating a more efficient management of working capital.

Overall, fluctuations in the cash conversion cycle suggest varying levels of efficiency in Now Inc's operations and working capital management over the past five years. It is essential for the company to continue monitoring and improving its cash conversion cycle to ensure optimal utilization of resources and maintain healthy cash flows.