DigitalOcean Holdings Inc (DOCN)
Quick ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|
| Cash | US$ in thousands | 317,236 | 140,772 | 1,713,390 |
| Short-term investments | US$ in thousands | 94,532 | 723,462 | 0 |
| Receivables | US$ in thousands | 62,186 | 53,833 | 39,619 |
| Total current liabilities | US$ in thousands | 192,645 | 165,516 | 58,239 |
| Quick ratio | 2.46 | 5.55 | 30.10 |
December 31, 2023 calculation
Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($317,236K
+ $94,532K
+ $62,186K)
÷ $192,645K
= 2.46
The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.
Looking at the quick ratio of DigitalOcean Holdings Inc over the past three years, we observe a significant decline from 30.10 in 2021 to 5.55 in 2022 and further to 2.46 in 2023.
A quick ratio of 2.46 as of December 31, 2023 indicates that the company had $2.46 of liquid assets available to cover each dollar of its current liabilities. While this ratio is above the ideal threshold of 1, the downward trend over the years raises concerns about the company's short-term liquidity position.
The gradual decrease in the quick ratio may suggest that DigitalOcean Holdings Inc is becoming less able to easily cover its immediate financial obligations with its current liquid assets. It could potentially imply a need for the company to efficiently manage its working capital or assess its liquidity management strategies to ensure it can meet its short-term liabilities effectively.
Peer comparison
Dec 31, 2023