Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Etsy Inc., liquidity ratios
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Current ratio | 2.18 | 4.17 | 4.89 | 6.07 | 4.29 | |
| Quick ratio | 1.64 | 3.72 | 4.42 | 5.68 | 3.65 | |
| Cash ratio | 1.60 | 3.67 | 4.33 | 5.57 | 3.32 |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Current Ratio
- The current ratio exhibited a generally declining trend over the five-year period. Starting at 4.29 in 2017, it increased significantly to 6.07 in 2018, indicating a strong short-term liquidity position. However, thereafter it decreased to 4.89 in 2019 and further declined to 4.17 in 2020. The downward trajectory continued sharply into 2021, reaching 2.18, which suggests a reduced ability to cover current liabilities with current assets compared to previous years.
- Quick Ratio
- The quick ratio followed a similar pattern to the current ratio, with an initial increase from 3.65 in 2017 to a peak of 5.68 in 2018. Subsequently, it declined steadily to 4.42 in 2019 and then to 3.72 in 2020. The most substantial drop occurred between 2020 and 2021, where the ratio fell to 1.64, indicating a significant reduction in the company's quick assets available to meet immediate liabilities.
- Cash Ratio
- The cash ratio mirrored the trends observed in both the current and quick ratios. Beginning at 3.32 in 2017, it increased to 5.57 in 2018, reflecting a peak liquidity position. After 2018, a consistent decline was noted: 4.33 in 2019, 3.67 in 2020, and a pronounced decrease to 1.6 in 2021. This downward movement signals a considerable reduction in cash and cash equivalents relative to current liabilities over the period.
- Overall Analysis
- Across all three liquidity ratios, the data reflect a pattern of strengthened liquidity in 2018, followed by a steady deterioration through 2021. The ratios remained well above 1.0 throughout, indicating solvency; however, the consistent declines point to a diminishing cushion for meeting short-term obligations. The marked decreases in 2021 suggest increased liquidity risk or a strategic shift in asset management affecting the availability of liquid assets.
Current Ratio
Etsy Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 1,341,501) | 1,894,781) | 921,038) | 680,289) | 439,264) | |
| Current liabilities | 615,588) | 454,664) | 188,528) | 112,062) | 102,477) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 2.18 | 4.17 | 4.89 | 6.07 | 4.29 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Amazon.com Inc. | 1.14 | 1.05 | — | — | — | |
| Home Depot Inc. | 1.23 | 1.08 | — | — | — | |
| Lowe’s Cos. Inc. | 1.19 | 1.01 | — | — | — | |
| TJX Cos. Inc. | 1.46 | 1.24 | — | — | — | |
| Current Ratio, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 1.17 | 1.06 | — | — | — | |
| Current Ratio, Industry | ||||||
| Consumer Discretionary | 1.25 | 1.18 | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Current ratio = Current assets ÷ Current liabilities
= 1,341,501 ÷ 615,588 = 2.18
2 Click competitor name to see calculations.
- Current Assets
- The current assets exhibited a general upward trend from 2017 to 2020, increasing from approximately 439 million US dollars to nearly 1.89 billion US dollars. However, in 2021, there was a noticeable decline to about 1.34 billion US dollars, indicating a reduction in liquid or near-liquid assets.
- Current Liabilities
- Current liabilities showed a consistent increase throughout the period, rising from approximately 102 million US dollars in 2017 to about 615 million US dollars in 2021. This upward trend indicates growing short-term financial obligations.
- Current Ratio
- The current ratio, an indicator of short-term liquidity, started at a strong position of 4.29 in 2017 and peaked at 6.07 in 2018, reflecting robust liquidity. Subsequently, it declined steadily to 4.89 in 2019 and 4.17 in 2020, before dropping significantly to 2.18 in 2021. Despite the decline, the ratio remained above 1, suggesting that the entity maintained sufficient current assets to cover current liabilities, although liquidity weakened notably by 2021.
- Overall Analysis
- The data reveals increasing current liabilities alongside fluctuating current assets, culminating in a reduced liquidity position in the latest period. The considerable decline in current assets combined with a steady increase in current liabilities led to the halving of the current ratio from 2020 to 2021, signaling an attentive need to monitor short-term financial health moving forward.
Quick Ratio
Etsy Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 780,196) | 1,244,099) | 443,293) | 366,985) | 315,442) | |
| Short-term investments | 204,416) | 425,119) | 373,959) | 257,302) | 25,108) | |
| Accounts receivable, net | 27,266) | 22,605) | 15,386) | 12,244) | 33,677) | |
| Total quick assets | 1,011,878) | 1,691,823) | 832,638) | 636,531) | 374,227) | |
| Current liabilities | 615,588) | 454,664) | 188,528) | 112,062) | 102,477) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.64 | 3.72 | 4.42 | 5.68 | 3.65 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Amazon.com Inc. | 0.86 | 0.83 | — | — | — | |
| Home Depot Inc. | 0.47 | 0.23 | — | — | — | |
| Lowe’s Cos. Inc. | 0.28 | 0.06 | — | — | — | |
| TJX Cos. Inc. | 1.01 | 0.50 | — | — | — | |
| Quick Ratio, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 0.77 | 0.68 | — | — | — | |
| Quick Ratio, Industry | ||||||
| Consumer Discretionary | 0.92 | 0.88 | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 1,011,878 ÷ 615,588 = 1.64
2 Click competitor name to see calculations.
- Total Quick Assets
- There is a significant upward trend in total quick assets from 2017 to 2020, rising from approximately $374 million to over $1.69 billion. This reflects a substantial increase in liquid assets during this period. However, in 2021, there is a noticeable decline to approximately $1.01 billion, indicating a contraction in quick assets compared to the previous year.
- Current Liabilities
- Current liabilities show a steady increase throughout the period under review. Starting at about $102 million in 2017, liabilities grow moderately in the first three years before accelerating markedly from 2019 to 2021. By the end of 2021, current liabilities reach approximately $616 million, more than six times the figure at the beginning of the period.
- Quick Ratio
- The quick ratio exhibits notable fluctuations. It peaks in 2018 at 5.68, indicating a strong liquidity position relative to current liabilities. Subsequently, it trends downward, dropping to 4.42 in 2019 and further to 3.72 in 2020. By 2021, the quick ratio falls significantly to 1.64, suggesting a weakening ability to cover short-term obligations with liquid assets despite the still positive surplus of quick assets over current liabilities.
- Overall Analysis
- Initially, the data reflects a period of increasing liquidity, with quick assets growing substantially faster than current liabilities, as the quick ratio remains above 3.5 until 2020. The surge in both assets and liabilities in 2020 could be indicative of expanded operations or increased financing. However, the marked decline in the quick ratio in 2021 to below 2.0, combined with the drop in quick assets and continued increase in current liabilities, signals a shift toward tighter liquidity conditions. This could point to increased short-term financial risk or changes in asset composition.
Cash Ratio
Etsy Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 780,196) | 1,244,099) | 443,293) | 366,985) | 315,442) | |
| Short-term investments | 204,416) | 425,119) | 373,959) | 257,302) | 25,108) | |
| Total cash assets | 984,612) | 1,669,218) | 817,252) | 624,287) | 340,550) | |
| Current liabilities | 615,588) | 454,664) | 188,528) | 112,062) | 102,477) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.60 | 3.67 | 4.33 | 5.57 | 3.32 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Amazon.com Inc. | 0.68 | 0.67 | — | — | — | |
| Home Depot Inc. | 0.34 | 0.12 | — | — | — | |
| Lowe’s Cos. Inc. | 0.28 | 0.06 | — | — | — | |
| TJX Cos. Inc. | 0.97 | 0.45 | — | — | — | |
| Cash Ratio, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 0.61 | 0.54 | — | — | — | |
| Cash Ratio, Industry | ||||||
| Consumer Discretionary | 0.63 | 0.58 | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 984,612 ÷ 615,588 = 1.60
2 Click competitor name to see calculations.
- Total Cash Assets
- The total cash assets demonstrated a significant upward trend from 2017 to 2020, rising from approximately $340.6 million to $1.669 billion. However, in 2021, there was a notable decline to about $984.6 million, indicating a reduction in cash reserves after a period of consistent growth.
- Current Liabilities
- Current liabilities showed a steady increase over the years, moving from $102.5 million in 2017 to $615.6 million in 2021. The most substantial growth occurred between 2019 and 2020, where liabilities more than doubled from $188.5 million to $454.7 million, continuing to increase into 2021, albeit at a slower pace.
- Cash Ratio
- The cash ratio, which measures the company's liquidity by comparing cash assets to current liabilities, exhibited a fluctuating pattern. It peaked at 5.57 in 2018, indicating strong liquidity, then declined to 4.33 in 2019 and further to 3.67 in 2020. The most pronounced drop occurred in 2021, with the ratio falling to 1.6, reflecting diminished liquidity relative to short-term obligations.
- Summary Insights
- Overall, the analysis reveals that while cash assets increased markedly until 2020, the concurrent rise in current liabilities and the sharp decline in cash ratio in 2021 suggest increased financial leverage or higher short-term obligations relative to cash reserves. The decline in liquidity ratio in the latest period may warrant further investigation to assess potential impacts on the company's short-term financial stability.