Netflix Inc. (NASDAQ:NFLX)

Current Ratio

The current ratio exhibited a decline from 1.25 in 2020 to 0.95 in 2021, indicating a reduction in current assets relative to current liabilities during that period. However, from 2021 onward, there was a recovery trend with the ratio improving to 1.17 in 2022, followed by a slight decline to 1.12 in 2023, and then an increase to 1.22 in 2024. This pattern suggests fluctuations in liquidity, with an overall trend towards strengthening liquidity by the end of the period.

Quick Ratio

The quick ratio followed a similar trajectory to the current ratio. It decreased from 1.22 in 2020 to 0.91 in 2021, reflecting a decrease in liquid assets excluding inventories relative to current liabilities. Subsequently, it rose to 1.12 in 2022 before slightly dropping to 1.07 in 2023, and then increased again to 1.18 in 2024. These changes indicate variability in the company's immediate liquidity position but suggest an improving ability to cover short-term obligations without relying on inventory liquidation by the end of the review period.

Cash Ratio

The cash ratio showed a downward trend from 1.05 in 2020 to 0.71 in 2021, highlighting a significant reduction in cash and cash equivalents in relation to current liabilities. While the ratio improved modestly over the subsequent years, rising to 0.76 in 2022, 0.81 in 2023, and 0.89 in 2024, it remained below the 2020 level throughout most of the period. This implies a more conservative cash reserve position relative to liabilities, though there is a gradual restoration of cash liquidity over time.

Current Assets

Current assets showed a decrease from 9,761,580 thousand US dollars at the end of 2020 to 8,069,825 thousand US dollars in 2021. Following this decline, there was a steady recovery with increases in 2022 and 2023, reaching 9,268,473 and 9,918,133 thousand US dollars respectively, and culminating in a significant rise to 13,100,379 thousand US dollars by the end of 2024.

Current Liabilities

Current liabilities increased from 7,805,785 thousand US dollars in 2020 to 8,488,966 thousand US dollars in 2021. A subsequent decline occurred in 2022, reducing liabilities to 7,930,974 thousand US dollars. However, liabilities rose again over the next two years, reaching 8,860,655 thousand US dollars in 2023 and 10,755,400 thousand US dollars in 2024.

Current Ratio

The current ratio, an indicator of short-term liquidity, declined notably from 1.25 in 2020 to 0.95 in 2021, implying a reduction in the company's ability to cover current liabilities with current assets during that period. The ratio improved to 1.17 in 2022 and slightly decreased to 1.12 in 2023. By the end of 2024, the current ratio increased again to 1.22, suggesting a restoration of liquidity closer to earlier levels.

Summary of Trends

The company experienced fluctuations in both current assets and current liabilities over the five-year period. After an initial decline in current assets and liquidity in 2021, a recovery trend was evident in subsequent years, accompanied by volatile but generally increasing current liabilities. The overall current ratio trend indicates a rebound in liquidity after a dip in 2021, reaching near-2020 levels by 2024. The significant rise in current assets in 2024 outpaced the increase in current liabilities, enhancing the company's short-term financial stability at the end of the period.

The analysis of the financial data reveals several notable trends concerning liquidity and short-term financial health over the reported periods.

Total Quick Assets

The total quick assets exhibit variability across the years. Starting at approximately 9.56 billion US dollars in 2020, there was a decline in 2021 to about 7.75 billion. Subsequently, there was a gradual recovery and increase through 2022 and 2023, reaching nearly 9.51 billion by the end of 2023. The most significant growth is observed in 2024, where the figure rises sharply to approximately 12.67 billion. This upward trend in quick assets in the later years indicates an improvement in the company's liquid resources that can be readily used to meet short-term obligations.

Current Liabilities

Current liabilities presented a different pattern. They increased from roughly 7.81 billion in 2020 to a peak of approximately 8.49 billion in 2021. Then, a decline occurred in 2022 to about 7.93 billion, followed by an increase again in 2023 to nearly 8.86 billion. In 2024, the liabilities surged to over 10.75 billion. The fluctuations in liabilities suggest variability in the short-term financial obligations, with a notable increment especially in the latest year that could indicate either increased operational scale or heightened short-term debt levels.

Quick Ratio

The quick ratio trends correspond closely with movements in quick assets and current liabilities. In 2020, the company maintained a healthy quick ratio of 1.22, indicative of more liquid assets than current liabilities. This ratio dropped substantially in 2021 to 0.91, reflecting a period where liquid assets were less than current liabilities, which may imply tighter liquidity conditions. The quick ratio then improved to 1.12 in 2022 and slightly decreased to 1.07 in 2023, maintaining a level above 1, demonstrating stable liquidity coverage. By 2024, the quick ratio increased again to 1.18, reinforcing improved liquidity positions.

In summary, despite fluctuations, the overall trend suggests an enhancement in liquidity from 2022 onward, supported by increases in quick assets and a quick ratio above 1, indicating the company's improved ability to cover its short-term liabilities with liquid assets. However, the rise in current liabilities in 2024 warrants attention as it represents an increase in short-term financial obligations which should be managed carefully to sustain liquidity strength.

Total Cash Assets

There is a noticeable fluctuation in total cash assets over the five-year period. The amount decreased significantly from $8.21 billion in 2020 to approximately $6.03 billion in 2021, remaining relatively stable around $6.06 billion in 2022. Subsequently, total cash assets increased to approximately $7.14 billion in 2023 and further rose to about $9.58 billion in 2024, representing a clear upward trend in the later years.

Current Liabilities

Current liabilities generally exhibit an upward trend. Beginning at around $7.81 billion in 2020, there was an increase to about $8.49 billion in 2021. In 2022, liabilities declined slightly to roughly $7.93 billion but then increased again to approximately $8.86 billion in 2023. The most significant rise occurred in 2024, with current liabilities reaching about $10.76 billion, the highest level in the examined period.

Cash Ratio

The cash ratio, reflecting liquidity by comparing cash assets to current liabilities, declined initially from 1.05 in 2020 to 0.71 in 2021. It showed a modest recovery to 0.76 in 2022 and continued to improve to 0.81 in 2023. By 2024, the cash ratio rose further to 0.89. Despite not returning to the 2020 level, this indicates an overall enhancement in short-term liquidity after the 2021 low point.

Overall Analysis

The data reveals a significant reduction in cash assets and liquidity in 2021, accompanied by a rise in current liabilities, suggesting increased short-term obligations and a weaker liquidity position that year. However, from 2022 onward, total cash assets improved steadily, supported by a moderate increase in current liabilities. The cash ratio's upward trajectory since 2021 indicates improving liquidity management, with the ratio approaching but not surpassing the initial level observed in 2020. The company appears to have strengthened its cash reserves relative to its short-term liabilities in recent years, although liabilities continued to increase, especially in 2024, warranting continued monitoring of liquidity risk.