Netflix Inc (NFLX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | — | 48.21 | 48.81 | 53.53 | 75.24 |
| Receivables turnover | 16.23 | 20.57 | 13.04 | 32.50 | 33.68 |
| Payables turnover | 23.38 | 26.38 | 28.54 | 20.70 | 23.28 |
| Working capital turnover | 16.63 | 31.89 | 23.67 | — | 12.78 |
Netflix Inc's activity ratios indicate the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.
1. Inventory Turnover:
- The inventory turnover ratio has declined from 75.24 in December 2020 to 48.21 in December 2023. This decrease suggests that Netflix is selling its inventory at a slower rate compared to previous years, which may indicate issues with inventory management or changing consumer demand.
2. Receivables Turnover:
- The receivables turnover ratio decreased from 33.68 in December 2020 to 16.23 in December 2024. This decline may suggest a longer collection period for receivables, indicating potential difficulties in collecting outstanding payments from customers.
3. Payables Turnover:
- The payables turnover ratio fluctuated over the years but overall remained relatively stable, ranging from 20.70 in December 2021 to 28.54 in December 2022. This indicates that Netflix is effectively managing its payables by paying off suppliers within a reasonable time frame.
4. Working Capital Turnover:
- The working capital turnover ratio varied significantly, reaching a peak of 31.89 in December 2023. This ratio signifies how efficiently Netflix is using its working capital to generate sales; however, further analysis would be needed to determine the reasons behind the fluctuations in this ratio.
Overall, Netflix's activity ratios paint a mixed picture of its operational efficiency, with notable declines in inventory and receivables turnover ratios. Further evaluation and comparison with industry benchmarks would be necessary to assess the company's performance accurately.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | — | 7.57 | 7.48 | 6.82 | 4.85 |
| Days of sales outstanding (DSO) | days | 22.48 | 17.74 | 27.99 | 11.23 | 10.84 |
| Number of days of payables | days | 15.61 | 13.84 | 12.79 | 17.64 | 15.68 |
Netflix Inc's activity ratios provide insights into how quickly the company is managing its resources and operating cycle.
1. Days of Inventory on Hand (DOH):
- Netflix's DOH has increased from 4.85 days in 2020 to 7.57 days in 2023. This indicates that the company is carrying more inventory on hand, which could tie up capital and impact cash flow efficiency. The absence of data for 2024 restricts a complete trend analysis.
2. Days of Sales Outstanding (DSO):
- The DSO for Netflix increased from 10.84 days in 2020 to 27.99 days in 2022, before declining to 22.48 days in 2024. The high DSO in 2022 suggests that Netflix took longer to collect revenue from its customers, impacting cash flow. The subsequent decrease in 2024 is a positive indication of improved efficiency in receivables management.
3. Number of Days of Payables:
- Netflix's payables period remained relatively stable, ranging from 12.79 days in 2022 to 17.64 days in 2021. A shorter payables period could suggest that Netflix is paying its suppliers more quickly, potentially impacting cash conversion cycle efficiency.
In summary, Netflix's activity ratios reveal mixed performance in managing its operating cycle efficiently. The company should focus on optimizing inventory levels, streamlining receivables collection, and managing payables effectively to enhance overall liquidity and operational effectiveness.
See also:
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 24.47 | 22.61 | 22.61 | 22.44 | 26.03 |
| Total asset turnover | 0.73 | 0.69 | 0.65 | 0.67 | 0.64 |
The fixed asset turnover ratio for Netflix Inc has shown a decreasing trend from 26.03 in December 2020 to 22.44 in December 2021, and then relatively stable around 22.61 from December 2022 to December 2023, before slightly increasing to 24.47 in December 2024. This ratio indicates the efficiency of the company in generating revenue from its investments in fixed assets.
On the other hand, the total asset turnover ratio has been steadily increasing from 0.64 in December 2020 to 0.73 in December 2024. This indicates that Netflix has been utilizing its total assets more efficiently to generate revenue over the years. The improvement in this ratio shows that the company is effectively using its assets to generate sales, which is a positive sign for its long-term operational efficiency and profitability.