Netflix Inc. (NASDAQ:NFLX)

The analysis of liquidity ratios over the observed quarters presents several notable trends and fluctuations.

Current Ratio

The current ratio shows an overall pattern of moderate variability with a general upward trend in the earlier periods, increasing from 0.82 in March 2020 to peaks around 1.27 in March 2021. This is followed by a dip towards the end of 2021, reaching as low as 0.95 in December 2021. Subsequently, there is a recovery phase where the ratio climbs back above 1.20 in the first three quarters of 2023. However, from late 2023 into 2024, the ratio fluctuates between 0.95 and 1.22, ending slightly above 1.20 in March 2025. This pattern suggests varying levels of short-term asset coverage for current liabilities, with occasional declines indicating tighter liquidity conditions followed by recoveries.

Quick Ratio

The quick ratio follows a similar trend to the current ratio but remains consistently lower, indicating that inventory might be contributing to the current assets. The ratio improves significantly from 0.66 in March 2020 to around 1.06 in early 2021. A noticeable contraction occurs around late 2021 and throughout 2022, dipping to lows around 0.66 in September 2024. There is moderate recovery afterward with values rising back to the high 0.80s by March 2025. This volatility suggests fluctuations in liquid asset availability excluding inventories, impacting immediate obligations coverage.

Cash Ratio

The cash ratio mirrors the quick ratio exactly, indicating that cash and equivalents likely dominate the liquid assets considered in the quick ratio calculation. This ratio also climbs from 0.66 in March 2020 to just above 1.06 in early 2021 before experiencing declines to roughly 0.66 in late 2024. The slight recovery to around 0.86 by March 2025 aligns with trends in the quick ratio, reflecting similar fluctuations in cash reserves relative to current liabilities over the analyzed periods.

In summary, liquidity profiles denote an initial strengthening phase until early 2021, followed by a period of contraction in liquidity indicators in late 2021 through 2024, and partial recovery in early 2025. The close alignment between the quick and cash ratios indicates minimal contribution from inventories to the liquid asset base. This pattern underscores a cautious liquidity management approach with temporary tightening episodes likely reflecting operational or market pressures impacting short-term financial flexibility.

Current assets

Current assets demonstrated a general upward trend from March 2020 through June 2023, increasing from approximately 6.45 billion US dollars to over 11.5 billion US dollars. Following this peak, there was a mild decline towards the end of 2023 and early 2024, with assets fluctuating around 9.9 to 10.0 billion US dollars. However, by the end of the observed period in March 2025, current assets had risen again to approximately 11.7 billion US dollars, indicating some recovery or strengthening of short-term asset holdings.

Current liabilities

Current liabilities exhibited fluctuations with no consistent long-term trend but showed notable volatility over the period. Starting at about 7.85 billion US dollars in March 2020, liabilities decreased and then fluctuated around 7.5 to 8.5 billion US dollars until late 2021. Thereafter, liabilities rose steadily, reaching a peak slightly above 10.7 billion US dollars in December 2024, before dropping to approximately 9.7 billion US dollars in March 2025. This increasing trend in liabilities towards the end of the timeline suggests growing short-term obligations during that period.

Current ratio

The current ratio, representing the company’s ability to cover short-term liabilities with short-term assets, initially improved from 0.82 in March 2020 to around 1.27 in March 2021. It then slightly declined and fluctuated between 0.95 and 1.33 for the remainder of 2021 and 2022, indicating varying liquidity levels. In 2023, the current ratio peaked at 1.33 in June before decreasing to 1.12 by December 2023. Entering 2024, a less stable trend was observed with ratios dropping below 1.0 in June and September, suggesting moments of tighter liquidity. The current ratio rose again towards early 2025, reaching 1.20 in March. Overall, liquidity showed some improvement post-2020 but also experienced intermittent periods of constraint, particularly in mid-2024.

Total Quick Assets

The total quick assets showed an overall upward trend from March 2020 to June 2024, with some fluctuations. Starting at approximately $5.15 billion in March 2020, quick assets increased sharply to a peak of around $8.39 billion by September 2020. However, there was a decline through the end of 2021, reaching a low near $6.03 billion in December 2021. From early 2022 onwards, quick assets experienced periods of both decline and growth, peaking notably at about $9.22 billion in September 2024 before slightly decreasing to $8.37 billion by March 2025. This pattern suggests intervals of asset accumulation followed by periodic decreases, with a resurgence in late 2023 and into 2024.

Current Liabilities

Current liabilities demonstrated a generally rising trajectory over the same timeframe. Starting at approximately $7.85 billion in March 2020, liabilities remained relatively steady through 2020 and early 2021, fluctuating between $7.6 billion and $8.5 billion. From mid-2021, liabilities increased steadily, reaching over $10.7 billion by September and December 2024 before slightly decreasing to $9.72 billion in March 2025. The steady increase in current liabilities over this period indicates growing short-term obligations that outpace the growth of quick assets in later stages.

Quick Ratio

The quick ratio initially improved significantly from 0.66 in March 2020 to a high of 1.06 by September 2020, indicating strengthened short-term liquidity during that period. Subsequently, the ratio declined somewhat, fluctuating around 0.94 to 0.99 through mid-2021. A notable decline occurred towards the end of 2021, where the ratio dipped as low as 0.66 in June 2024, reflecting reduced liquidity relative to current liabilities. Despite some recovery with ratios reaching up to 0.99 in June 2023 and 0.89 in December 2024, the ratio generally remained below 1.0 for much of the subsequent period. This suggests that, while there were intermittent improvements, the company faced periods where quick assets were insufficient to fully cover current liabilities on a short-term basis.

Overall Insight

The data reflect a dynamic liquidity position over the examined quarters. The company initially strengthened its liquid asset base relative to current liabilities in early 2020 but faced increasing financial pressure in later years as current liabilities grew faster than quick assets. The quick ratio's volatility and tendency to remain below 1 for extended periods raises a cautionary signal regarding short-term financial health. The resurgence in quick assets towards late 2023 and 2024 partially mitigates this concern; however, the persistent increase in current liabilities underscores the need for ongoing monitoring of working capital management.

Total Cash Assets

Total cash assets experienced a significant increase from March 2020 through September 2020, reaching a peak of approximately 8.39 billion USD. Following this peak, there was a general decline with some fluctuations, falling to around 6 billion USD by December 2021. From early 2022 to late 2023, cash assets showed moderate variability but remained generally stable between approximately 6 billion and 8.5 billion USD. However, from early 2024 through the end of the observed period, cash holdings showed a notable recovery and growth, with a sharp increase in September and December 2024, peaking close to 9.58 billion USD in June 2024 before slightly declining again by March 2025 to about 8.37 billion USD. Overall, the cash position maintained a relatively strong level with intermittent fluctuations, indicating periods of cash accumulation followed by strategic utilization or reduction.

Current Liabilities

Current liabilities stayed relatively consistent but revealed an upward trend over the analyzed quarters. Starting around 7.85 billion USD in March 2020, liabilities fluctuated slightly yet tended to increase, particularly from the second half of 2021 onward. The liabilities climbed progressively from approximately 7.7 billion USD in early 2022 to peak at over 10.75 billion USD by December 2024, before slightly declining to 9.72 billion USD in March 2025. This steady increase in current liabilities suggests rising short-term obligations, which could reflect greater operational expenses or restructuring of short-term debt within the company’s financial structure.

Cash Ratio

The cash ratio exhibited marked fluctuations over the period under review. Initially, it improved significantly from 0.66 in March 2020 to surpass 1.0 in the third quarter of 2020, indicating that cash and cash equivalents were sufficient to cover current liabilities completely during that period. However, following this peak, the ratio generally trended downward with notable decreases particularly around the end of 2021, reaching as low as 0.66 again by September 2024. Short-term improvements were observed inconsistently, with small rebounds around mid-2023 and late 2024. The decline in the cash ratio despite fluctuations in cash assets suggests the growth of current liabilities outpaced cash reserves at several points, indicating a relatively tighter liquidity position in those periods. The reductions and partial recoveries in cash ratio point to ongoing balancing between liquidity management and increased obligations.