Palo Alto Networks Inc (PANW)

The liquidity ratios of Palo Alto Networks Inc. over the period from October 2020 to July 2025 reveal a pattern of declining and relatively stable liquidity positions, with some incremental improvements in recent periods.

Current Ratio:
The current ratio, which measures the company's ability to meet short-term obligations with its current assets, experienced a notable decline from 1.63 in October 2020 to a low of approximately 0.66-0.70 during early 2022. This indicates a weakening liquidity position during this period, with current liabilities beginning to outpace current assets. Subsequently, the ratio showed signs of stabilization and modest improvement, reaching approximately 0.86 by October 2023 and hovering around 0.89 in mid-2024. Despite this uptick, the ratio remains below 1.0, suggesting that the company's current assets are generally insufficient to cover current liabilities without relying on non-current assets or other measures.

Quick Ratio:
The quick ratio, which excludes inventory from current assets to assess more liquid assets readily available to meet short-term liabilities, mirrors the trend observed in the current ratio. It declined from 1.48 in October 2020 to approximately 0.58-0.62 through 2022, indicating increased difficulty in covering short-term obligations with liquid assets. Recent data shows gradual improvement, reaching around 0.77 in October 2023 and approximately 0.82 in July 2025. Similar to the current ratio, the quick ratio remains below 1.0, pointing towards a potential liquidity concern in terms of highly liquid assets.

Cash Ratio:
The cash ratio, which measures the company's ability to cover short-term liabilities solely with cash and cash equivalents, experienced a decline from 1.22 in October 2020 to roughly 0.31-0.52 during 2022-2023. Thereafter, it shows slight fluctuations but remains relatively low, at approximately 0.36 in July 2025. This indicates that the company's cash position alone is insufficient to meet immediate liabilities without the support of other liquid assets.

Overall Assessment:
The liquidity ratios for Palo Alto Networks Inc. suggest a trend of weakening liquidity from late 2020 into early 2022, followed by gradual stabilization and slight improvements thereafter. Despite some positive signs in recent periods, all three ratios consistently remain below the generally acceptable threshold of 1.0. This positioning implies that the company may face challenges in meeting its short-term obligations solely through liquid assets, and thus, should monitor liquidity management closely to ensure operational flexibility and financial stability.

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See also:

Palo Alto Networks Inc Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The analysis of Palo Alto Networks Inc's cash conversion cycle (CCC) over the period from October 2020 to July 2025 reveals notable fluctuations with both periods of improvement and deterioration. The CCC initially demonstrated a decreasing trend, moving from 52.12 days in October 2020 to a low of 39.79 days in October 2021, indicating an enhanced efficiency in managing receivables, inventory, and payables. During this phase, the company appeared to optimize its working capital management, resulting in a shorter cycle time.

However, after October 2021, the CCC exhibited significant volatility characterized by periods of substantial increase. By July 2022, the cycle had expanded markedly to 114.96 days, and further escalation was observed in October 2022 at 129.43 days, suggesting a deterioration in the company's working capital management. The widening of the cycle indicates potential challenges in receivables collection, longer inventory turnover, or delayed payables processing, which could reflect strategic changes, operational inefficiencies, or shifts in customer payment behaviors.

The trend continued with the CCC reaching a peak of 190.57 days in July 2023. This prolonged cycle period implies an increase in the time taken to convert investments in inventory and receivables back into cash, potentially impacting liquidity and operational flexibility. Post-July 2023, there was some reduction, with the cycle decreasing to 131.56 days in October 2023, and further down to 80.15 days in January 2024, indicating some stabilization and improved working capital practices.

Subsequently, the CCC fluctuated again, reaching 87.22 days in April 2024 before rising to 131.46 days in July 2024, and then decreasing to 49.26 days in October 2024, which represents a significant improvement, approaching the earlier, more efficient cycle levels. The subsequent periods saw moderate increases and decreases, with the cycle at 71.52 days in January 2025 and stabilizing around 74.00 days in April 2025, before rising again to 111.07 days in July 2025.

Overall, the cash conversion cycle for Palo Alto Networks Inc has experienced considerable variability over this period, with critical peaks indicating periods of working capital inefficiency and troughs reflecting more optimized operations. The company's management appears to have undertaken efforts to improve the cycle times, especially noticeable after the steep peaks in mid-2023, although the cycle remains subject to fluctuations that could be driven by internal operational factors or external market dynamics.