DigitalOcean Holdings Inc (DOCN)
Liquidity ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 2.45 | 3.14 | 2.47 | 2.73 | 2.61 | 2.56 | 3.84 | 12.88 | 5.72 | 9.19 | 16.59 | 25.81 | 30.39 |
| Quick ratio | 2.27 | 2.89 | 2.32 | 2.56 | 2.46 | 2.41 | 3.63 | 12.31 | 5.55 | 8.95 | 16.30 | 25.58 | 30.10 |
| Cash ratio | 1.94 | 2.50 | 2.01 | 2.22 | 2.14 | 2.08 | 3.29 | 11.29 | 5.22 | 8.35 | 15.71 | 24.90 | 29.42 |
DigitOcean Holdings Inc's liquidity ratios have shown a declining trend over the analyzed periods. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, decreased from 30.39 in December 2021 to 2.45 in December 2024. This indicates a significant decrease in the company's ability to meet its short-term obligations.
Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also exhibited a downward trend, falling from 30.10 in December 2021 to 2.27 in December 2024. This suggests a continued deterioration in the company's ability to meet its immediate payment obligations without relying on inventory.
The cash ratio, which indicates the extent to which the company can cover its current liabilities with its most liquid assets (cash and cash equivalents), also declined from 29.42 in December 2021 to 1.94 in December 2024. This shows a significant decrease in the company's cash reserves relative to its current liabilities over the analysis period.
Overall, the declining trend in DigitalOcean Holdings Inc's liquidity ratios raises concerns about its short-term solvency and ability to meet its financial obligations promptly. Management may need to closely monitor and improve the company's cash management and liquidity position to ensure its financial stability in the future.
Additional liquidity measure
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -29.40 | 40.75 | 22.15 | 27.08 | 27.78 | 13.42 | 18.38 | 15.69 | -2.31 | 61.80 | -2.77 | 0.15 | 6.66 |
The cash conversion cycle is a measure that reflects how efficiently a company manages its working capital by evaluating the time it takes to convert its investments in inventory into cash flows from sales.
Analyzing DigitalOcean Holdings Inc's cash conversion cycle over the provided periods, several observations can be made:
1. The cash conversion cycle fluctuates significantly over the quarters, indicating potential variations in the company's management of inventory, accounts receivables, and accounts payable.
2. As of March 31, 2022, the company drastically reduced its cash conversion cycle to 0.15 days, suggesting an efficient cash management strategy or improvements in working capital management.
3. In some periods, such as September 30, 2022, and December 31, 2023, the cash conversion cycle increased significantly, indicating potential challenges in managing working capital efficiently or delays in converting inventory into cash.
4. Interestingly, the cash conversion cycle turned negative in certain quarters like June 30, 2022, and December 31, 2024, which could be attributed to efficient management of cash flows or aggressive payment collection practices.
Overall, the analysis of DigitalOcean Holdings Inc's cash conversion cycle highlights the company's ability to effectively manage its working capital and convert investments into cash, but also suggests potential areas for improvement in optimizing cash flow efficiency throughout the business cycles.