Duolingo Inc (DUOL)
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 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 2.61 | 3.09 | 3.28 | 3.22 | 3.24 | 3.29 | 3.62 | 3.65 | 3.84 | 4.29 | 4.45 | 4.72 | 5.20 | 6.05 | 1.91 | 1.89 | 2.41 |
| Quick ratio | 2.08 | 2.57 | 2.80 | 2.73 | 2.70 | 2.99 | 3.13 | 3.16 | 3.35 | 3.86 | 4.01 | 4.25 | 4.65 | 5.57 | 1.35 | 1.40 | 1.83 |
| Cash ratio | 2.08 | 2.57 | 2.80 | 2.73 | 2.70 | 2.99 | 3.13 | 3.16 | 3.35 | 3.86 | 4.01 | 4.25 | 4.65 | 5.57 | 1.35 | 1.40 | 1.83 |
Duolingo Inc's liquidity ratios, namely the current ratio, quick ratio, and cash ratio, have exhibited fluctuations over the past few years.
The current ratio, which measures the company's ability to cover short-term liabilities with its short-term assets, fluctuated between 2.41 and 6.05 during the period from December 31, 2020 to September 30, 2022, indicating a strong liquidity position. However, the ratio decreased gradually thereafter to reach 2.61 by December 31, 2024, suggesting a slight decline in the company's short-term liquidity.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, exhibited a similar trend, declining from 1.83 on December 31, 2020, to 2.08 by December 31, 2024. This indicates that Duolingo's ability to cover its short-term obligations with its most liquid assets, excluding inventory, has weakened slightly over the years.
The cash ratio, which specifically focuses on the company's ability to cover its current liabilities with its cash and cash equivalents, followed a comparable pattern, declining from 1.83 on December 31, 2020, to 2.08 on December 31, 2024.
Overall, while Duolingo Inc has maintained satisfactory liquidity levels based on these ratios, there has been a slight decline in the company's liquidity position over the years, which may warrant close monitoring to ensure the company can meet its short-term obligations effectively.
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 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 130.65 | 133.87 | 128.63 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Duolingo Inc's cash conversion cycle remained at 0.00 days consistently from December 31, 2020, to September 30, 2021, indicating an efficient cash management system where the company was able to quickly convert its investments in inventory and accounts receivables into cash without tying up capital for an extended period.
However, there was a significant shift in the cash conversion cycle starting from December 31, 2022, where it increased to 128.63 days and continued to rise to 133.87 days as of March 31, 2023. This sudden increase suggests that Duolingo Inc may be facing challenges in managing its working capital effectively, potentially experiencing delays in converting its inventory and receivables into cash.
From September 30, 2023, onwards, the cash conversion cycle reverted to 0.00 days, indicating a rapid improvement in the company's cash conversion efficiency. This could be attributed to better inventory management, improved collection of receivables, or other operational optimizations.
Overall, the fluctuation in Duolingo Inc's cash conversion cycle highlights the importance of monitoring working capital closely to ensure efficient cash flow management and sustainable operations.