Alphabet Inc Class A (GOOGL)

The liquidity ratios of Alphabet Inc, as represented by the current ratio, quick ratio, and cash ratio, demonstrate the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to meet short-term liabilities with short-term assets, shows a gradual decline over the past five years, from 3.37 in 2019 to 2.10 in 2023. This decline suggests a reduction in the company's short-term asset base relative to its short-term liabilities.

Similarly, the quick ratio, which excludes inventory from current assets to provide a more conservative assessment of liquidity, also shows a decline over the same period, from 3.35 in 2019 to 2.10 in 2023.

The cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, also reflects a decreasing trend, from 2.74 in 2019 to 1.51 in 2023.

Overall, the declining trend in these liquidity ratios indicates a potential reduction in the company's ability to cover its short-term obligations with its current assets. It's important for stakeholders to monitor this trend closely and assess the company's strategies to address its liquidity position.

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Additional liquidity measure

The cash conversion cycle for Alphabet Inc has displayed a fluctuating trend over the past five years. The cycle decreased from 41.82 days in 2020 to 36.43 days in 2023, indicating an improvement in the company's ability to convert its resources into cash. This reduction suggests that Alphabet Inc has been more efficient in managing its working capital and converting its inventory and receivables into cash. However, the increase in the cycle to 44.85 days in 2022 followed by a decrease in 2023 raises questions about the company's management of its operating cycle.

It is important to note that a shorter cash conversion cycle generally signifies that the company is collecting payments from customers more quickly and managing its inventory more effectively. Conversely, a longer cycle may indicate potential issues with accounts receivable, inventory management, or payment terms with suppliers. Therefore, while the recent improvement is a positive sign, Alphabet Inc should continue to focus on optimizing its working capital processes to ensure a more consistent and efficient cash conversion cycle in the future.