Yelp Inc (YELP)

Yelp Inc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, show the company's ability to meet short-term financial obligations.

1. Current Ratio:
- The current ratio indicates Yelp's ability to cover short-term liabilities with its current assets.
- Yelp's current ratio has decreased from 4.98 in December 2020 to 3.34 in December 2024.
- Despite the decline, the current ratio remains above 1, implying that Yelp has more than enough current assets to cover its current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, measures the company's ability to pay off short-term obligations without relying on inventory.
- Yelp's quick ratio has decreased from 4.24 in December 2020 to 2.05 in December 2024.
- The decreasing trend suggests a decrease in the company's ability to quickly cover its short-term liabilities without relying on inventory.

3. Cash Ratio:
- The cash ratio measures the company's ability to cover its short-term liabilities with its cash and cash equivalents.
- Yelp's cash ratio has also declined from 4.24 in December 2020 to 2.05 in December 2024.
- The decreasing trend indicates a reduction in Yelp's ability to meet short-term obligations using only its cash and cash equivalents.

Overall, while Yelp Inc's liquidity ratios have shown a declining trend over the years, the company still maintains a solid liquidity position with current assets exceeding current liabilities. However, management should closely monitor these ratios to ensure the company remains able to meet its short-term financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle is a measure of how long it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. Looking at Yelp Inc's cash conversion cycle data from 2020 to 2024, we can observe the following:

1. December 31, 2020: A cash conversion cycle of 0.00 days suggests that Yelp was able to efficiently convert its investments into cash, indicating effective management of inventory and receivables.

2. December 31, 2021: A significant increase in the cash conversion cycle to 109.74 days signifies a potential delay in converting investments into cash inflows. This could be due to longer inventory turnover or slower collection of receivables, which may put pressure on Yelp's liquidity and working capital management.

3. December 31, 2022, 2023, and 2024: The cash conversion cycle returns to 0.00 days in the subsequent years, indicating a positive trend towards better efficiency in managing working capital and converting investments into cash.

In summary, Yelp Inc experienced a spike in its cash conversion cycle in 2021, which could be a point of concern in terms of working capital management. However, the company managed to improve its efficiency in the following years, leading to a quicker conversion of investments into cash inflows. Continuous monitoring and optimization of the cash conversion cycle are crucial for Yelp to maintain healthy liquidity and financial stability.