Yelp Inc (YELP)

Based on the provided data, we can analyze the liquidity ratios of Yelp Inc over the years.

1. Current Ratio:
The current ratio indicates the company's ability to meet its short-term obligations with its current assets. Yelp Inc's current ratio has shown fluctuations over the years, ranging from a high of 5.12 in June 2020 to a low of 2.73 in June 2023. Generally, a current ratio above 1 indicates that the company has more current assets than current liabilities. While Yelp Inc's current ratio has remained above 1 throughout the period, the decreasing trend from 2020 to 2024 might indicate a potential challenge in meeting short-term obligations if the trend continues.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Yelp Inc's quick ratio has shown a similar fluctuating trend as the current ratio, with values ranging from a high of 4.36 in June 2020 to a low of 1.84 in June 2023. A quick ratio above 1 indicates that the company can cover its short-term liabilities without relying on selling inventory. While Yelp Inc's quick ratio has also generally remained above 1, the declining trend raises concerns about the company's ability to meet immediate obligations with its most liquid assets.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, focusing solely on the company's cash and cash equivalents to cover its current liabilities. Yelp Inc's cash ratio follows a similar pattern as the quick ratio and current ratio, showing fluctuations over the years. The company's cash ratio has ranged from a high of 4.36 in June 2020 to a low of 1.84 in June 2023. A cash ratio above 1 indicates that the company can fully cover its short-term liabilities with its cash reserves. While Yelp Inc has maintained a cash ratio above 1, the decreasing trend suggests a potential liquidity concern if cash reserves are not managed effectively.

In summary, Yelp Inc has maintained liquidity levels above the threshold of 1 for all three ratios, indicating the company's ability to meet its short-term obligations. However, the declining trend in these ratios over the years raises concerns about Yelp's liquidity position and the need for effective cash management strategies to ensure continued financial stability.

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Additional liquidity measure

The cash conversion cycle is a measure of the time it takes for a company to convert its investments in inventories into cash receipts from its sales. A shorter cash conversion cycle indicates that the company is able to efficiently manage its working capital and generate cash from its operations.

Analyzing the cash conversion cycle of Yelp Inc over the period from March 31, 2020, to December 31, 2024, reveals fluctuations in the efficiency of the company's cash management. The cycle remained at a consistent 0.00 days from March to December 2020 and from September to December 2021, indicating a very efficient conversion of investments into cash during those periods.

However, in March and June 2021, the cash conversion cycle increased significantly to 68.38 days and 71.51 days, respectively, suggesting a delay in converting investments into cash. The cycle improved to 55.48 days in June 2022 but then rose sharply to 95.45 days in September 2022, indicating challenges in managing working capital during that period.

The cash conversion cycle returned to 0.00 days from December 2022 onwards, indicating improved efficiency in converting investments into cash. Overall, fluctuations in the cash conversion cycle of Yelp Inc reflect varying levels of operational efficiency and working capital management over the analyzed period.