Netflix Inc (NFLX)
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 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.22 | 1.13 | 0.95 | 1.07 | 1.12 | 1.29 | 1.33 | 1.26 | 1.17 | 1.14 | 1.05 | 1.05 | 0.95 | 1.17 | 1.23 | 1.27 | 1.25 | 1.24 | 1.12 | 0.82 |
| Quick ratio | 1.11 | 0.98 | 0.78 | 0.89 | 0.99 | 1.10 | 1.13 | 1.08 | 1.07 | 0.97 | 0.89 | 0.89 | 0.82 | 1.03 | 1.09 | 1.13 | 1.15 | 1.14 | 1.02 | 0.72 |
| Cash ratio | 0.89 | 0.86 | 0.66 | 0.76 | 0.81 | 0.94 | 0.99 | 0.94 | 0.76 | 0.79 | 0.78 | 0.78 | 0.71 | 0.94 | 0.99 | 1.06 | 1.05 | 1.06 | 0.94 | 0.66 |
Netflix Inc's liquidity ratios have shown some fluctuations over the years.
The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has generally been above 1, indicating a relatively healthy liquidity position. However, there was a significant drop in the current ratio from 1.25 at the end of December 2020 to 0.95 at the end of December 2021, suggesting a potential strain on the company's short-term liquidity during that period. The current ratio recovered thereafter and stood at 1.22 at the end of December 2024.
In terms of the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, Netflix Inc's performance has been slightly more volatile. The quick ratio dipped below 1 in December 2021, indicating a potential difficulty in meeting immediate obligations without relying on inventory. However, the ratio improved over the next few years, reaching 1.11 at the end of December 2024.
The cash ratio, which assesses the company's ability to cover its current liabilities with cash and cash equivalents alone, has also experienced fluctuations. The ratio dropped below 1 in December 2021, indicating that Netflix Inc may have had limited cash resources to meet short-term obligations at that time. The cash ratio improved to 0.89 by the end of December 2024, but remained below the levels seen in earlier years.
Overall, while Netflix Inc has generally maintained a satisfactory liquidity position based on the current and quick ratios, there have been periods of weaker liquidity, as reflected in the declining ratios in December 2021. Monitoring these ratios over time can provide valuable insights into the company's liquidity risk and management of short-term obligations.
See also:
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 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 6.87 | 8.53 | 1.73 | 1.32 | 11.48 | 13.42 | 2.55 | 2.11 | 15.20 | 5.90 | 0.45 | -2.54 | -6.40 | -4.22 | -4.27 | -3.89 | -4.84 | -4.05 | -1.48 | -5.88 |
The cash conversion cycle (CCC) of Netflix Inc has been fluctuating over the quarters. From March 31, 2020, to June 30, 2022, the company maintained a negative CCC, indicating efficient management of its working capital. However, the CCC turned positive from September 30, 2022, to December 31, 2024, suggesting a shift towards a less efficient working capital management.
The negative CCC during the initial period suggests that Netflix was able to convert its inventory and receivables into cash quickly, indicating effective management of its operations. This could be attributed to the company's subscription-based revenue model, which generates cash flow in advance of the provision of services.
The positive CCC in later periods may indicate potential challenges in managing working capital, such as slower collection of receivables or increased inventory holding periods. This shift could be due to various factors, including changes in customer payment behaviors, investment in content creation, or changes in supplier payment terms.
Overall, the fluctuation in Netflix's CCC highlights the importance of monitoring working capital closely to ensure efficient cash flow management and sustainable operations, especially in the dynamic and competitive streaming industry in which the company operates.