Netflix Inc (NFLX)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.22 | 1.12 | 1.17 | 0.95 | 1.25 |
| Quick ratio | 1.11 | 0.99 | 1.07 | 0.82 | 1.15 |
| Cash ratio | 0.89 | 0.81 | 0.76 | 0.71 | 1.05 |
The current ratio measures Netflix Inc's ability to meet its short-term obligations with its current assets. A current ratio above 1 indicates that the company has more current assets than current liabilities. From 2020 to 2024, Netflix's current ratio fluctuated, starting at 1.25 in 2020, decreasing to 0.95 in 2021, and then gradually increasing to 1.22 in 2024. Although the current ratio dipped below 1 in 2021, it improved in the following years, indicating a stronger ability to cover short-term liabilities.
The quick ratio, which is a more stringent measure of liquidity that excludes inventory from current assets, also showed fluctuations over the same period. Netflix's quick ratio declined from 1.15 in 2020 to 0.82 in 2021 before rising to 1.11 in 2024. These fluctuations suggest that while the company faced some challenges in the short term, it managed to improve its ability to cover immediate liabilities without relying on inventory.
The cash ratio, the most conservative liquidity measure, reflects Netflix's ability to cover its current liabilities with cash and cash equivalents alone. The cash ratio decreased from 1.05 in 2020 to 0.71 in 2021 but then gradually improved to 0.89 in 2024. This shows that Netflix may have had lower cash reserves relative to its short-term obligations in the early years but strengthened its cash position by 2024.
Overall, the liquidity ratios of Netflix Inc indicate a mixed performance in managing short-term obligations over the years, with improvements noted in the later years despite some initial dips.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 6.87 | 11.48 | 22.68 | 0.42 | 0.01 |
The cash conversion cycle of Netflix Inc has shown fluctuations over the years based on the provided data. As of December 31, 2020, the company had an exceptionally low cash conversion cycle of 0.01 days, indicating efficient management of cash flow. However, by December 31, 2022, the cash conversion cycle significantly increased to 22.68 days, suggesting a delay in converting investments into cash.
Subsequently, by December 31, 2023, the cash conversion cycle improved to 11.48 days, showing some progress in cash management. By the end of December 31, 2024, Netflix Inc further reduced its cash conversion cycle to 6.87 days, indicating a more efficient cash conversion process compared to the previous year.
Overall, analyzing the cash conversion cycle of Netflix Inc reveals a mix of efficient and inefficient cash management practices over the years, with fluctuations in the time taken to convert investments into cash. It is essential for the company to continue monitoring and improving its cash conversion cycle to optimize its cash flow operations effectively.