Netflix Inc. (NASDAQ:NFLX)

The financial ratios reveal notable trends in the company’s efficiency in managing receivables, payables, and working capital over the observed five-year period.

Receivables Turnover

The receivables turnover ratio shows a consistent decline from 40.92 in 2020 to 26.20 in 2023, followed by a slight recovery to 29.21 in 2024. This downward trend suggests that, over time, the company has been collecting its receivables less frequently during the year, indicating a potential slowdown in cash inflows from customers. Although the ratio improves somewhat in the last reported year, the overall trend may reflect elongated collection processes or changes in customer payment behavior.

Payables Turnover

The payables turnover ratio exhibits some volatility, decreasing from 23.28 in 2020 to 20.70 in 2021, then increasing sharply to 28.54 in 2022, followed by a gradual decrease to 23.38 in 2024. The spike in 2022 could indicate more frequent payments to suppliers during that period, potentially reflecting improved liquidity or strategic supplier relations. The subsequent decrease suggests a return to more extended payment terms or cautious cash management.

Working Capital Turnover

Working capital turnover experienced a significant increase from 12.78 in 2020 to 23.67 in 2022, peaking at 31.89 in 2023, before dropping notably to 16.63 in 2024. The sharp rise until 2023 suggests increased efficiency in using working capital to generate sales, which could imply enhanced operational performance or better asset management. The decline in 2024 points to a potential slowdown or changes in working capital structure that reduced turnover efficiency.

Average Receivable Collection Period

The average receivable collection period gradually lengthened from 9 days in 2020 to 14 days in 2023, then shortened slightly to 12 days in 2024. This overall increase aligns with the declining receivables turnover, confirming that customers took longer on average to settle their accounts. The minor improvement in the final year may indicate attempts to accelerate collections.

Average Payables Payment Period

The average payables payment period increased from 16 days in 2020 to 18 days in 2021, then decreased to 13 days in 2022, before rising again to 16 days in 2024. These fluctuations suggest variations in payment strategies, possibly balancing supplier relationships with cash flow optimization. The shorter period in 2022 corresponds with the peak in payables turnover, indicating quicker payments during that year.

Revenues

Revenues have exhibited a consistent upward trajectory over the analyzed period. Starting at approximately 24.996 billion US dollars in 2020, revenues increased each year, reaching about 39.001 billion US dollars by the end of 2024. This steady growth indicates a strong and expanding top line, reflective of increasing sales or service income over time.

Trade Receivables

Trade receivables have also increased steadily during the same period, rising from roughly 611 million US dollars in 2020 to about 1.335 billion US dollars in 2024. The rise in trade receivables aligns with the increase in revenues, suggesting that the company is extending more credit to customers or experiencing longer collection periods as its business grows.

Receivables Turnover

The receivables turnover ratio demonstrates a downward trend from 40.92 in 2020 to a low of 26.2 in 2023, with a slight recovery to 29.21 by the end of 2024. This declining ratio implies that the efficiency in collecting receivables has weakened over the years, indicating that receivables are being collected more slowly relative to sales. However, the slight improvement in 2024 may suggest initial efforts to enhance collection processes or credit policy management.

Overall Analysis

The data reflects a growing company with increasing revenues and trade receivables. However, the decreasing receivables turnover ratio signals a potential concern in receivables management efficiency. Maintaining a balance between revenue growth and efficient receivables collection will be critical to supporting healthy cash flows moving forward.

The analysis of the financial data reveals several notable trends over the five-year period ending in 2024. The cost of revenues consistently increased each year, growing from approximately $15.3 billion in 2020 to over $21 billion in 2024. This indicates a continuous rise in the expenses directly associated with generating revenue, suggesting either expansion in operations or increased costs of goods and services used in production.

Accounts payable figures exhibited some variability but overall showed an upward trend. Beginning at about $656 million in 2020, the balance rose to nearly $900 million by 2024. Though there was a dip in 2022, the general increase implies that the company has been extending its payables or experiencing increased purchasing activity on credit.

Payables Turnover Ratio

The payables turnover ratio, which measures how quickly the company pays its suppliers, started at 23.28 in 2020. It then decreased to 20.7 in 2021, peaked at 28.54 in 2022, declined again to 26.38 in 2023, and settled at 23.38 in 2024. The fluctuations in this ratio suggest variations in payment policies or changes in operational cash flow management. The peak in 2022 indicates a notably faster rate of payment to suppliers during that year, whereas lower ratios in other years suggest relatively longer payment periods.

Overall, the steady increase in cost of revenues paired with the growing accounts payable balance and fluctuating payables turnover ratio highlights dynamic changes in the company's cost management and supplier payment practices. The data suggests efforts to manage supplier relationships and operational costs in a shifting business environment over the analyzed period.

The analysis of the financial data over the five-year period reveals several key trends and fluctuations in the operational and financial performance metrics.

Working Capital

The working capital figures exhibit significant volatility. Starting with a positive value at the end of 2020, there is a sharp decline to a negative working capital position by the end of 2021. This indicates a period where current liabilities exceeded current assets, reflecting potential liquidity pressure during that year. Subsequently, there is a recovery trend in 2022 and 2023, with working capital returning to positive territory and progressively increasing. The most notable improvement occurs in 2024, where the working capital nearly doubles from the previous year, suggesting enhanced short-term financial stability and potentially improved cash management or operational efficiency.

Revenues

Revenue figures demonstrate a consistent upward trend throughout the entire period. Each year marks an increase over the prior year’s revenue, indicating sustained growth in sales or service income. The revenue growth rate appears to accelerate in the later years, with the largest increase observed between 2023 and 2024, highlighting favorable market conditions or successful business expansion strategies in the latest period.

Working Capital Turnover

The working capital turnover ratio begins at a healthy level in 2020. There is no data available for 2021, precluding an assessment for that year. However, in 2022, the ratio jumps markedly, suggesting a more efficient use of working capital in generating revenues. This efficiency improves further in 2023, reaching its peak in the observed period. In 2024, the ratio declines but remains relatively high, indicating a slight decrease in efficiency compared to 2023 but maintaining a strong turnover performance overall.

In summary, the data depict a scenario of strong revenue growth accompanied by fluctuations in working capital levels and notable variations in working capital turnover efficiency. The recovery and subsequent increase in working capital from 2022 onward, alongside the growing revenues, suggest improved operational management following a challenging liquidity position in 2021. The working capital turnover ratio enhancements imply that the company has been able to utilize its short-term assets more effectively to support its expanding revenue base, albeit with some moderation in the last observed year.

The financial ratios related to receivables for the periods from December 31, 2020, through December 31, 2024, illustrate a distinct trend in the management of accounts receivable.

Receivables Turnover Ratio

This ratio has shown a steady decline from 40.92 in 2020 to a low of 26.2 in 2023, followed by a slight recovery to 29.21 in 2024. The decreasing turnover suggests that the company is collecting its receivables less frequently throughout the year over this period, potentially indicating a relaxation in credit terms or changes in customer payment behavior.

Average Receivable Collection Period

The average collection period has increased from 9 days in 2020 to a peak of 14 days in 2023, before decreasing somewhat to 12 days in 2024. This increase means that on average, it took more days to collect receivables in the later years compared to the initial period analyzed. The subsequent slight decrease in 2024 indicates some improvement but still represents a longer collection cycle than in 2020.

Overall, the combination of declining receivables turnover and increasing collection periods over these years suggests a period of slower collection efficiency. However, the slight improvements seen in 2024 may indicate initial corrective actions or shifts in credit management strategies aiming to improve cash flow and reduce the days sales outstanding.

The analysis of the payables-related financial indicators reveals varying patterns over the five-year period ending in 2024.

Payables Turnover Ratio

The payables turnover ratio demonstrates fluctuations during the observed period. Starting at 23.28 in 2020, it decreased to 20.7 in 2021, indicating potentially slower payments to suppliers. In 2022, the ratio sharply increased to 28.54, suggesting faster payment of payables within that year. This upward trend then declined slightly over the subsequent years, registering 26.38 in 2023 and returning near the initial level at 23.38 in 2024. These variations imply adjustments in payment policies or cash flow management affecting supplier payments.

Average Payables Payment Period

The average payables payment period, expressed in days, shows an inverse trend relative to the payables turnover ratio. Beginning at 16 days in 2020, it extended to 18 days in 2021, reflecting slower payments. This period shortened significantly to 13 days in 2022, indicating accelerated payment practices. In the subsequent years, the payment period lengthened slightly to 14 days in 2023 and then returned to 16 days by 2024. The trend aligns with the payables turnover ratio movements and signals variability in payment timing, potentially linked to strategic cash management or changes in supplier terms.

Overall, the data suggest that the company has experienced shifts between faster and slower payment cycles throughout these years. The notable spike in payables turnover and corresponding reduction in payment days in 2022 may reflect a deliberate effort to improve supplier relations or optimize working capital. The return to more moderate levels by 2024 indicates a normalization or stabilization of payment practices following the previous fluctuations.