Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
CoStar Group Inc., liquidity ratios
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Current ratio | 13.92 | 11.78 | 11.75 | 5.79 | 7.87 | |
| Quick ratio | 13.75 | 11.67 | 11.67 | 5.62 | 7.72 | |
| Cash ratio | 13.33 | 11.30 | 11.35 | 5.17 | 7.14 |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of the liquidity ratios over the five-year period reveals a clear upward trend, indicating an improving liquidity position.
- Current ratio
- The current ratio shows a progressive increase from 7.87 in 2018 to 13.92 in 2022. After a dip in 2019 to 5.79, it rebounded sharply in 2020 and maintained a steady increase through 2021 and 2022. This trend suggests the company has significantly enhanced its ability to cover short-term liabilities with current assets over time.
- Quick ratio
- The quick ratio follows a similar pattern, decreasing from 7.72 in 2018 to 5.62 in 2019, then rising to 13.75 by 2022. This consistent increase from 2020 onward indicates stronger short-term liquidity without relying on inventory, reflecting improved financial flexibility.
- Cash ratio
- The cash ratio also reflects a positive development, moving from 7.14 in 2018 down to 5.17 in 2019, and then climbing steadily to 13.33 by 2022. This metric confirms an enhanced capacity to cover current obligations using the most liquid assets, i.e., cash and cash equivalents.
Overall, the company has demonstrated significant progress in strengthening its liquidity position after 2019, with all three ratios exhibiting notable growth through 2022. The improvement in these ratios may imply prudent cash and asset management strategies, resulting in increased short-term financial stability and a stronger buffer to meet immediate obligations.
Current Ratio
CoStar Group Inc., current ratio calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Current ratio = Current assets ÷ Current liabilities
= 5,185,867 ÷ 372,615 = 13.92
- Current Assets
- Current assets exhibited a steady upward trend over the analyzed period. Starting at approximately $1.21 billion in 2018, current assets remained relatively stable through 2019, then increased significantly in 2020. This growth continued in the subsequent years, reaching around $5.19 billion by the end of 2022. The sharp increase beginning in 2020 suggests a substantial enhancement in liquidity or possibly changes in asset composition or scale of operations.
- Current Liabilities
- The company's current liabilities also rose consistently each year, albeit at a more moderate pace compared to current assets. From about $154 million in 2018, current liabilities grew to roughly $373 million by 2022. This steady increase reflects a gradual rise in short-term obligations but at a level well below the increase in current assets.
- Current Ratio
- The current ratio, a key liquidity indicator, reveals strong and improving short-term financial health. The ratio started at 7.87 in 2018 and declined somewhat in 2019 to 5.79. From 2020 onward, the ratio increased sharply, indicating a considerable improvement in the company’s ability to meet short-term liabilities with its current assets. By 2022, the current ratio reached 13.92, an exceptionally high level that suggests very comfortable liquidity, possibly indicating significant excess working capital.
- Overall Analysis
- The data indicates that the company has substantially increased its current assets since 2019, resulting in significant growth in liquidity and an elevated current ratio. While current liabilities have risen gradually, they have not kept pace with current assets. This trend points to strengthening short-term financial stability and suggests prudent management of liquid resources. The consistently high and rising current ratio over recent years may also indicate a conservative approach to liquidity or shifts in the business model requiring higher working capital.
Quick Ratio
CoStar Group Inc., quick ratio calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 5,121,915 ÷ 372,615 = 13.75
- Total Quick Assets
- The total quick assets demonstrate a significant upward trend over the five-year period. Starting from approximately $1.19 billion in 2018, the value maintains a similar level in 2019 before experiencing a sharp increase in 2020. This growth continues steadily in both 2021 and 2022, reaching over $5.12 billion by the end of 2022. The substantial rise in quick assets indicates improved liquidity and a stronger ability to cover short-term obligations using the most liquid assets.
- Current Liabilities
- Current liabilities show a consistent increase throughout the period. Beginning at around $154 million in 2018, liabilities rise moderately each year, reaching approximately $373 million in 2022. Despite this growth, the increase in liabilities is relatively modest compared to the growth observed in quick assets, suggesting the company is managing its short-term debt responsibly without letting it outpace liquid asset growth.
- Quick Ratio
- The quick ratio exhibits notable volatility but maintains a strong and improving position annually. In 2018, the ratio was high at 7.72, before declining to 5.62 in 2019. Following this dip, it more than doubles to 11.67 in 2020 and remains stable at that level in 2021. By 2022, the ratio further increases to 13.75, signaling a very strong liquidity position. This upward movement reflects that the company has substantially increased its quick assets relative to its current liabilities, enhancing its short-term financial health.
- Overall Analysis
- Over the five years, the company demonstrates a robust improvement in liquidity, supported by a significant rise in quick assets and a controlled increase in current liabilities. The sharp increases in quick assets beginning in 2020 correspond with consistent improvements in the quick ratio, indicating enhanced capability to meet short-term obligations without reliance on inventory or other less liquid assets. Such trends point to a stronger financial footing and a conservative approach to managing current liabilities in relation to highly liquid resources.
Cash Ratio
CoStar Group Inc., cash ratio calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 4,967,970 ÷ 372,615 = 13.33
- Total cash assets
- The total cash assets exhibited a significant increase over the observed period. Starting at approximately $1.1 billion in 2018, there was a slight decline in 2019 to around $1.07 billion. However, a marked growth occurred in 2020, with cash assets rising to about $3.76 billion, followed by more moderate increases in 2021 and 2022, reaching nearly $5.0 billion by the end of 2022. This upward trend indicates a substantial strengthening of liquidity resources over these years.
- Current liabilities
- Current liabilities showed a consistent upward trajectory throughout the period. From $154.2 million in 2018, liabilities increased to $207.1 million in 2019 and further escalated to $331 million in 2020. The growth continued more gradually in subsequent years, with liabilities ending at $372.6 million in 2022. Although liabilities grew, the pace was considerably slower compared to the surge in total cash assets.
- Cash ratio
- The cash ratio, which measures the ability to cover current liabilities with cash and cash equivalents, followed an overall increasing trend. It declined from 7.14 in 2018 to 5.17 in 2019, reflecting a tightening liquidity position during that year. However, in 2020, the ratio more than doubled to 11.35, coinciding with the significant rise in cash assets. The ratio remained relatively stable into 2021 at 11.3 and further improved to 13.33 in 2022. This pattern indicates a growing capacity to meet short-term obligations solely through liquid assets.