AppLovin Corp. (NASDAQ:APP)

Current Ratio

The current ratio exhibits a declining trend from 5.05 at the end of 2021 to 1.71 by the end of 2023, followed by a slight recovery to 2.19 in 2024. This indicates a decrease in the company's short-term liquidity position initially, with some improvement in the most recent period. Despite this recovery, the ratio remains significantly lower than in 2021, suggesting less cushion to cover short-term liabilities with current assets.

Quick Ratio

The quick ratio follows a similar downward trajectory, declining from 4.82 in 2021 to 1.54 in 2023 before moderately improving to 2.04 in 2024. This ratio, which excludes inventory from current assets, confirms a consistent reduction in the company's ability to meet short-term obligations with more liquid assets. The partial rebound in 2024 indicates an attempt to strengthen liquidity but still at a reduced level compared to the earlier periods.

Cash Ratio

The cash ratio shows a more pronounced decrease from 4.02 in 2021 to 0.53 in 2023, reaching the lowest liquidity position among the three ratios. There is a slight increase to 0.7 in 2024, reflecting an increase in cash and cash equivalents relative to current liabilities but still indicating a considerably weaker immediate liquidity position than in 2021 and 2022. This trend points to a reduction in the company's most liquid resources available to cover current liabilities.

The current ratio experienced a notable decline from 2021 to 2023, followed by a partial recovery in 2024. This indicates a shifting pattern in the company’s ability to cover its short-term obligations with its short-term assets.

Current Ratio Trend

The current ratio began at 5.05 in 2021, representing a strong liquidity position. A consistent decrease was observed through 2023, falling to 1.71. This suggests a weakening ability to meet short-term liabilities. In 2024, the ratio increased to 2.19, indicating some improvement in liquidity, though remaining below the 2021 level.

Concurrent changes in current assets and current liabilities contributed to the observed ratio fluctuations. Current assets decreased from 2021 to 2023, then increased in 2024. Current liabilities increased steadily throughout the period. The combination of decreasing assets and increasing liabilities drove the significant decline in the current ratio between 2021 and 2023. The 2024 increase in the ratio is attributable to a larger increase in current assets compared to the increase in current liabilities.

Asset and Liability Dynamics

Current assets decreased from US$3,235,064 thousand in 2021 to US$1,616,163 thousand in 2023, before rising to US$2,312,190 thousand in 2024.

Current liabilities increased from US$640,097 thousand in 2021 to US$1,057,472 thousand in 2024, demonstrating a consistent upward trend.

The movement in the current ratio suggests a potential shift in the company’s working capital management or operational needs. While the 2024 improvement is positive, continued monitoring of both current assets and current liabilities is warranted to assess the sustainability of this trend and ensure adequate short-term financial health.

Total Quick Assets

The total quick assets showed a declining trend from 3,085,024 thousand US dollars at the end of 2021 to 1,455,962 thousand US dollars in 2023. However, in 2024, there was a notable recovery, with quick assets increasing to 2,155,657 thousand US dollars. Despite this partial rebound, the level in 2024 remains below the 2021 figure.

Current Liabilities

Current liabilities decreased from 640,097 thousand US dollars at the end of 2021 to 578,958 thousand US dollars in 2022, indicating an improvement in short-term obligations. However, the trend reversed subsequently, with liabilities rising sharply to 944,122 thousand US dollars in 2023 and further increasing to 1,057,472 thousand US dollars in 2024. This upward movement suggests increasing short-term financial commitments over the period.

Quick Ratio

The quick ratio experienced a significant decline over the four years. Starting at a strong 4.82 in 2021, it fell to 3.08 in 2022 and then sharply declined to 1.54 in 2023. In 2024, the quick ratio showed some improvement to 2.04 but remained well below the initial level. This indicates a deterioration in the company's immediate liquidity position, though with some recovery in the most recent period.

Cash Assets Trend

The total cash assets show a significant declining trend from the end of 2021 to 2023, decreasing from approximately $2.57 billion to around $502 million. However, there is a partial recovery in 2024, with cash assets rising to approximately $741 million. Despite this increase, cash assets remain considerably lower than the initial 2021 level.

Current Liabilities Trend

Current liabilities initially decrease slightly from about $640 million in 2021 to $579 million in 2022. Thereafter, the liabilities increase sharply, reaching approximately $944 million in 2023 and further rising to around $1.06 billion by the end of 2024. This reflects a growing short-term obligation on the company's balance sheet over the period, especially noticeable after 2022.

Liquidity Position (Cash Ratio)

The cash ratio, which measures the ability to cover current liabilities with total cash assets, exhibits a marked deterioration over the period. The ratio falls from a very strong 4.02 in 2021, indicating cash assets were more than four times current liabilities, down to a low of 0.53 in 2023. This means that in 2023, cash assets covered only slightly over half of the current liabilities. In 2024, there is a slight improvement to 0.7, but liquidity remains well below the 2021 level, signaling a continued weaker cash position relative to obligations.

Overall Analysis

The data reveals a weakening liquidity profile from 2021 through 2023 as cash reserves decline sharply while current liabilities increase significantly. Although some improvement in cash assets and liquidity is observed in 2024, the company's cash resources are still insufficient to cover its short-term liabilities at a similar capacity as in 2021. This trend could impact the company's short-term financial flexibility and ability to meet immediate obligations without additional financing or asset conversion.