Applied Materials Inc. (NASDAQ:AMAT)

The analysis of liquidity ratios over the observed quarters reveals distinct fluctuations and general trends that offer insights into the company's short-term financial stability and operational efficiency.

Current Ratio

The current ratio demonstrates moderate variability with values ranging predominantly between approximately 2.16 and 3.17. Early in the period, the ratio remains elevated above 2.5, reaching a peak of 3.17 around January 2021. Following this peak, a gradual decline is observed, with the ratio falling closer to the 2.1-2.3 range over subsequent quarters through early 2023. However, from mid-2023 onwards, there is a noticeable rebound back up to values near 2.8 before another slight decrease towards 2.46 by April 2025. This suggests a generally strong liquidity position with occasional contractions and recoveries in the company’s ability to cover short-term liabilities with current assets.

Quick Ratio

The quick ratio shows a similar pattern to the current ratio but with overall lower values, as expected, since it excludes inventory from current assets. Initially, the ratio remains around 1.6, increasing steadily to a peak of approximately 2.15 in early 2021. Subsequently, a pronounced decline occurs, reaching its lowest point near 1.17 by late 2022, indicating tighter liquidity when excluding inventory. A recovery phase follows, with the ratio climbing back close to 1.95 by late 2024 before a minor dip near 1.62 at the end of the observation period. This trend reflects periods of fluctuating reliance on very liquid assets to meet immediate obligations.

Cash Ratio

The cash ratio experiences more pronounced variability compared to the other liquidity measures. Starting near 0.98, it rises steadily through mid-2020 to reach a peak of about 1.47 in early 2021. Thereafter, a significant decline is apparent, plunging to around 0.35 by late 2022, indicative of reduced cash or cash equivalents relative to current liabilities. A gradual recovery ensues, with the ratio improving to roughly 1.26 by late 2024, before slipping slightly towards 0.84 by April 2025. The deeper troughs and wider swings in the cash ratio highlight volatility in the company’s most liquid reserves over the quarters.

Overall, the liquidity ratios suggest that while the company maintained solid short-term financial health throughout most of the period, late 2021 to late 2022 saw noticeable weakening in immediate liquidity, particularly in cash holdings. Subsequent periods exhibit a corrective trend, with incremental improvements in liquidity metrics, though not uniformly reaching prior peak levels. These dynamics may reflect changing operational cash flows, working capital management strategies, or external economic factors impacting asset liquidity and short-term obligations.

The analysis of the financial data covering current assets, current liabilities, and the current ratio over the reported periods reveals several key trends and fluctuations, indicative of the company's short-term financial position and liquidity management.

Current Assets

Current assets demonstrate a general upward trajectory from early 2019 through the beginning of 2024. Starting at US$10,285 million in January 2019, there is a steady increase with some periods of minor decline or stagnation, peaking around US$21,220 million in April 2024. Notably, after reaching this high, current assets exhibit a slight decline towards the end of the reporting range, falling to US$19,708 million by April 2025. This trend suggests increasing asset base available for short-term obligations, though the slight recent decrease may warrant attention.

Current Liabilities

Current liabilities also display an increasing trend, rising from US$3,776 million in January 2019 to a peak near US$8,468 million in October 2024. The period reflects fluctuations with a relatively steady increase but with noticeable peaks and troughs, especially in later periods. The increase in liabilities is generally paralleled by the growth in assets but at a slower pace, which affects liquidity ratios.

Current Ratio

The current ratio, which measures the company's ability to cover short-term liabilities with short-term assets, shows variability within a range between approximately 2.16 and 3.17. Initially, the ratio trends downward from 2.72 in early 2019 to around 2.16 in October 2022, indicating decreasing liquidity. However, after this decline, the ratio exhibits recovery, reaching values above 2.8 by early 2024 before a modest decline again to 2.46 by the latest period. Throughout the timeline, the current ratio remains above 2, which typically indicates a comfortable liquidity position.

Overall, the company maintains a solid liquidity profile with current ratios consistently well above 1, suggesting strong capability to meet short-term obligations. The steady increase in current assets, outpacing the growth in current liabilities to a degree, supports this position. The recent slight deterioration in the current ratio coupled with a decline in current assets near the end of the available data could suggest the need for ongoing monitoring of liquidity and working capital management strategies.

The analysis of the quarterly financial data reveals several notable trends in liquidity and current liabilities over the studied periods.

Total Quick Assets

The total quick assets demonstrate a general upward trajectory from the beginning to the end of the period, increasing from 6,156 million US dollars in early 2019 to a peak of approximately 14,705 million US dollars in the second quarter of 2024. Some fluctuations are evident, notably a dip around mid-2022 where values decreased from over 10,000 million to under 9,000 million US dollars, followed by a recovery and eventual growth. The later quarters show a slight decline after peaking, but overall the asset base remains significantly higher than at the start.

Current Liabilities

Current liabilities mostly trend upward, beginning at 3,776 million US dollars and rising to a high of 8,468 million US dollars in the final quarter of 2024. Incremental increases are punctuated by occasional decreases, such as a reduction in liabilities noted in early 2024 compared to the previous quarters. Overall, the steady increase in current liabilities reflects growing operational or short-term financial obligations.

Quick Ratio

The quick ratio exhibits variability throughout the periods, signaling fluctuating liquidity conditions. Initially, the ratio was steady around 1.6 but declined after 2019 to lows near 1.17 in late 2022, indicating tighter liquidity at that time. Post-2022, the quick ratio recovers gradually, reaching values above 1.9 by late 2024. Such improvement suggests enhanced ability to cover current liabilities with liquid assets after a period of relative constraint. The fluctuations align with movements in total quick assets and current liabilities, reflecting changes in the company’s short-term financial strength and management of liquid resources.

In summary, the data reflect an overall growth in liquid assets and liabilities, with liquidity ratios varying across quarters but ultimately trending toward healthier short-term financial positions by the end of the period. The interim declines in both quick assets and quick ratio during mid-periods highlight phases of tightened liquidity that were later addressed.

The financial data indicates several notable trends in liquidity and short-term financial position over the analyzed quarters.

Total Cash Assets

Total cash assets exhibited fluctuations throughout the periods. Initially, cash levels remained relatively stable with minor decreases between early 2019 and late 2019, followed by a significant increase in early 2020, peaking around April 2020. Subsequently, cash assets varied, showing a downward trend towards the end of 2022, reaching one of the lowest points in the period analyzed around October 2022. From early 2023 onwards, the cash position improved steadily, achieving new highs by late 2024 before seeing a moderate decline by April 2025.

Current Liabilities

Current liabilities generally increased over the time frame. Starting from approximately $3.8 billion in early 2019, there was a gradual upward movement with occasional fluctuations. The liabilities peaked notably around October 2021, reaching a level above $6.3 billion, indicating increased short-term obligations. After this peak, there was some volatility but a consistently elevated level of current liabilities persisted, stabilizing between $7.0 billion and $8.4 billion from 2022 through early 2025.

Cash Ratio

The cash ratio experienced considerable variability, reflecting changes in cash assets relative to current liabilities. Early in the period, the ratio hovered near or slightly below 1.0, indicating a balanced or slightly conservative liquidity position. The ratio improved significantly in 2020, reaching around 1.3 to 1.5, suggestive of enhanced liquidity buffers during that period. However, starting in late 2021 and through much of 2022, the ratio declined sharply to a low of 0.35, indicating a tighter liquidity situation and reduced cash coverage of current liabilities. This was followed by a recovery phase from 2023 onward, with the ratio increasing again and surpassing 1.0 during 2023 and 2024, signaling improved liquidity management. Towards the latest data points in 2025, the cash ratio shows a slight decline but remains above 0.8.

Overall, the trends highlight a period of liquidity strengthening in early 2020, followed by a tightening phase in 2021 through 2022, and a subsequent recovery in liquidity into 2023 and beyond. The fluctuations in cash ratio relative to current liabilities imply active cash management strategies responding to shifting operational and financial conditions.