ServiceNow Inc (NOW)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.10 | 1.06 | 1.11 | 1.05 | 1.21 |
| Quick ratio | 0.96 | 0.94 | 1.00 | 0.95 | 1.10 |
| Cash ratio | 0.69 | 0.66 | 0.71 | 0.67 | 0.83 |
ServiceNow Inc's liquidity ratios indicate its ability to meet short-term financial obligations.
- The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has fluctuated over the years but generally remained above 1, showing that the company has sufficient current assets to meet its short-term obligations. However, the ratio decreased from 1.21 in 2020 to 1.10 in 2024, indicating a slight decline.
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Despite fluctuations, the quick ratio has generally been below the current ratio, indicating a reliance on inventory to meet short-term obligations. The trend shows a slight decline from 2020 to 2024.
- The cash ratio, which focuses on the ability to cover short-term liabilities with cash and cash equivalents, has also experienced fluctuations over the years. Although the ratios are relatively low compared to the current and quick ratios, they show a downward trend from 0.83 in 2020 to 0.69 in 2024.
Overall, while ServiceNow Inc's liquidity ratios demonstrate the company's ability to meet short-term obligations, the declining trends observed in these ratios suggest a potential need for closer monitoring to ensure continued liquidity strength 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 | 63.58 | 58.90 | 108.95 | 143.78 | 153.62 |
The cash conversion cycle of ServiceNow Inc has shown a significant improvement over the years, decreasing consistently from 153.62 days as of December 31, 2020 to 63.58 days as of December 31, 2024. This indicates that the company has been able to efficiently manage its working capital and convert its resources into cash at a faster rate.
A lower cash conversion cycle suggests that ServiceNow Inc has been able to streamline its operations, reduce the time it takes to collect receivables, and manage inventory levels effectively. This improvement can be attributed to the company's efforts in optimizing its supply chain, enhancing customer payment terms, and improving overall operational efficiency.
The decreasing trend in the cash conversion cycle is a positive sign for ServiceNow Inc as it signifies better liquidity management and working capital efficiency. It implies that the company has been able to generate cash more rapidly, which can support future growth initiatives, investments, and overall financial health.