Meta Platforms Inc. (META)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.98 | 2.67 | 2.20 | 3.15 | 5.05 |
| Quick ratio | 2.86 | 2.55 | 2.01 | 2.94 | 4.89 |
| Cash ratio | 2.35 | 2.05 | 1.51 | 2.27 | 4.14 |
The liquidity ratios of Meta Platforms Inc. have shown a decreasing trend over the years, indicating a potential tightening of its short-term liquidity position.
- The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 5.05 in December 2020 to 2.98 in December 2024. This suggests that Meta Platforms may have reduced ability to meet its current liabilities with its current assets over the years.
- The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also experienced a decline from 4.89 in December 2020 to 2.86 in December 2024. This indicates that Meta Platforms may have a reduced capacity to settle its immediate obligations without relying on inventory.
- The cash ratio, which focuses exclusively on the available cash and cash equivalents to cover current liabilities, exhibited a downward trend from 4.14 in December 2020 to 2.35 in December 2024. The decreasing cash ratio suggests that Meta Platforms might have less cash on hand to meet its short-term obligations as of the latest financial year.
Overall, the declining liquidity ratios of Meta Platforms Inc. raise concerns about the company's ability to efficiently manage its short-term financial obligations. Investors and creditors may monitor these ratios closely to assess the company's liquidity position and its capacity to weather potential financial challenges in the future.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -55.16 | -36.30 | -46.04 | -39.24 | 19.10 |
The cash conversion cycle measures how efficiently a company manages its working capital by evaluating the time it takes to convert inventory and account receivables into cash. A positive cash conversion cycle indicates that the company takes longer to convert its investments in inventory and accounts receivables into cash, whereas a negative cash conversion cycle suggests that the company is able to collect cash from its sales before it needs to pay its suppliers.
For Meta Platforms Inc., the cash conversion cycle has shown a significant improvement over the years. In December 31, 2020, the company had a positive cash conversion cycle of 19.10 days, indicating that it took around 19 days for Meta Platforms to convert its investments into cash. However, by December 31, 2021, the cash conversion cycle turned negative at -39.24 days, suggesting that Meta Platforms was able to collect cash from its sales before having to pay its suppliers, leading to a more efficient working capital management.
Furthermore, in the following years, Meta Platforms continued to improve its cash conversion cycle, with December 31, 2022 showing a further decrease to -46.04 days. This trend continued into December 31, 2023 (-36.30 days) and December 31, 2024 (-55.16 days), indicating that Meta Platforms has been able to manage its working capital more effectively, potentially due to streamlining its operations and enhancing its cash collection processes.
Overall, the consistent decrease in Meta Platforms Inc.'s cash conversion cycle highlights the company's efficient working capital management and ability to generate cash from its operations promptly, showcasing a positive trend in its financial performance and operational efficiency over the analyzed period.