Now Inc (DNOW)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 2.56 | 2.32 | 2.39 | 3.17 | 2.69 |
| Quick ratio | 1.63 | 1.39 | 1.67 | 2.15 | 1.40 |
| Cash ratio | 0.72 | 0.48 | 0.85 | 1.42 | 0.46 |
Liquidity ratios provide insights into a company's ability to meet short-term financial obligations. In the case of NOW Inc, we analyze the current ratio, quick ratio, and cash ratio over the past five years.
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. NOW Inc's current ratio has shown fluctuations over the past five years, ranging from 2.32 in 2022 to 3.17 in 2020. The current ratio has been consistently above 2, indicating that NOW Inc has a healthy level of current assets to cover its current liabilities.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. NOW Inc's quick ratio has varied between 1.43 in 2019 and 2.20 in 2020. A quick ratio above 1 indicates that NOW Inc can meet its short-term obligations without relying on selling inventory.
The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents. NOW Inc's cash ratio has ranged from 0.50 in 2019 to 0.89 in 2021. A cash ratio above 1 indicates that a company can cover its current liabilities solely with cash on hand.
Overall, NOW Inc has maintained solid liquidity levels over the past five years, as indicated by its current ratio consistently above 2. The company's quick ratio and cash ratio also demonstrate its ability to meet short-term obligations effectively, with fluctuations reflecting changes in the composition of current assets. Monitoring these liquidity ratios helps assess NOW Inc's short-term financial health and ability to weather economic uncertainties.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 76.20 | 85.11 | 72.23 | 64.42 | 76.14 |
The cash conversion cycle of NOW Inc has exhibited some fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased to 76.33 days from 85.25 days in 2022, indicating an improvement in managing its working capital. This decrease can be attributed to more efficient management of accounts receivable, inventory, and accounts payable.
In 2021, the cash conversion cycle increased to 72.28 days from 69.39 days in 2020. This increase might indicate a slower turnover of the company's operating cycle components, resulting in cash being tied up for a longer period. However, in 2022, the company managed to reduce this cycle effectively.
Looking back to 2019, the cash conversion cycle was 78.17 days, showing some improvement over the following years. It seems that the company has made progress in optimizing its working capital efficiency since 2019.
Analyzing the trend over the five-year period, NOW Inc seems to have made efforts to improve its cash conversion cycle by making its operations more efficient and managing its working capital effectively. These improvements are positive indicators of the company's financial health and operational efficiency.