Broadcom Inc. (NASDAQ:AVGO)

The analysis of the liquidity ratios over multiple quarters reveals distinct trends in the company's short-term financial health. Initially, all three ratios—current, quick, and cash—exhibited relatively strong liquidity, with values generally above 1, indicating an adequate ability to cover short-term liabilities.

Current Ratio

The current ratio started at 1.56 and showed an overall increasing trend until it reached a peak around 2.82 in late 2023. This upward movement suggests an improving ability to meet current obligations through current assets during the period. However, from early 2024, a marked decline occurred, reducing the ratio to 1.0 by early 2025, before slightly recovering to 1.5. Despite the rebound, the later values remain significantly below the prior peak, indicating a potential tightening of liquidity or a strategic shift in working capital management.

Quick Ratio

The quick ratio followed a similar pattern to the current ratio initially, increasing from 1.30 to around 2.34 by late 2023, reflecting a strong position excluding inventory. This suggests that liquid assets were sufficient to cover current liabilities without relying on inventory sales. However, the ratio subsequently declined sharply in early 2024 to values near 0.68, which is below the generally preferred threshold of 1. This decrease points to a reduction in the most liquid assets relative to short-term liabilities, potentially signaling increased liquidity risk or changes in asset composition.

Cash Ratio

The cash ratio, representing the most conservative liquidity measure, also increased steadily from 0.83 to about 1.92 by late 2023, indicating a solid cash and cash equivalent position relative to current liabilities. The ratio then experienced a notable drop beginning in early 2024, falling to approximately 0.45, the lowest compared to other ratios. Although there is a modest increase toward mid-2025, the cash ratio remains below 1, which may imply tighter cash availability or increased reliance on other current assets to meet liabilities.

Overall, the liquidity ratios demonstrate a period of strengthening short-term financial stability through 2023, followed by a significant decline starting in early 2024. This pattern may reflect changes in operational cash flow, working capital strategy, or external financial pressures. The liquidity position in the most recent periods warrants careful monitoring to ensure the company can maintain adequate short-term financial flexibility.

The analysis of the quarterly financial data reveals several key trends in liquidity management over the examined periods.

Current Assets

The company's current assets demonstrate a general upward trend with fluctuations. Starting at approximately $12.1 billion, the assets increased steadily and reached a peak of $27.2 billion around early 2024. This peak is followed by a slight decline and subsequent stabilization around the $20 billion to $25 billion range in later quarters. The significant increase during early 2024 indicates a notable accumulation of liquid resources or short-term investments.

Current Liabilities

Current liabilities show a relatively stable pattern until early 2024, ranging mostly between $6.3 billion and $7.5 billion. However, there is a sharp and substantial increase starting around early 2024, where liabilities rise dramatically to over $20 billion. This elevated level of current liabilities continues through the latest quarters under review, indicating that the company might have taken on considerable short-term obligations in that period.

Current Ratio

The current ratio reflects the relationship between current assets and liabilities, offering insight into short-term financial health. Initially, the ratio improved significantly from 1.56 to around 2.8, indicating progressively increasing liquidity and an enhanced ability to cover current debts. This strong liquidity position persisted for several quarters. However, starting in early 2024, the current ratio declined sharply, falling below or near 1 in multiple quarters. This decline correlates with the sharp rise in current liabilities and indicates potential liquidity pressure, suggesting that assets are barely sufficient to meet short-term obligations during that period. Toward the latest quarter, the ratio showed a mild recovery to 1.5, implying some improvement in short-term financial stability.

Overall, the data suggests that the company maintained a robust liquidity position for most of the observed timeline until early 2024 when current liabilities surged sharply. This surge caused the current ratio to drop, indicating tightening liquidity. The slight recovery in the current ratio at the end of the period may signal efforts to stabilize short-term financial conditions after a period of increased obligations.

The analysis of the quarterly financial data reveals several notable trends in liquidity and current liability levels over the observed periods.

Total Quick Assets

Total quick assets exhibit a general upward trajectory from early 2020 through late 2023, increasing from approximately $10.1 billion to a peak around $17.3 billion. This increase indicates an accumulation of liquid assets readily available to meet short-term obligations. Notably, the peak is followed by some fluctuations in 2024 and 2025 with values oscillating between approximately $14.6 billion and $17.2 billion, suggesting some volatility but maintaining generally elevated liquid asset levels compared to the start of the period.

Current Liabilities

Current liabilities display a more mixed pattern. Initially, from early 2020 through late 2021, current liabilities remain relatively stable, generally fluctuating between $6.3 billion and $7.5 billion. However, a striking surge occurs starting in early 2024, with liabilities rising sharply to levels exceeding $16 billion and even above $20 billion in some quarters. This significant increase in current liabilities may imply increased short-term obligations or financing activities and contrasts markedly with the relatively steady prior period.

Quick Ratio

The quick ratio closely tracks the relationship between liquid assets and current liabilities, and its trend reflects the interplay of the two aforementioned metrics. From early 2020 through late 2023, the quick ratio remains generally robust, maintaining values above 1.3 and reaching highs above 2.3. This suggests strong liquidity positions where quick assets are substantially higher than current liabilities. However, beginning in early 2024, the quick ratio experiences a sharp decline, dropping below 1 and reaching lows around 0.68 to 0.82, indicating that current liabilities exceed quick assets. Toward the later quarters, a modest recovery is observed with the ratio moving back above 1, but overall, this period marks a significant decrease in liquidity compared to previous years.

In summary, the company maintained strong liquidity and controlled current liabilities through 2023, with quick ratios consistently above 1, signifying a capacity to cover short-term liabilities with liquid assets. The marked rise in current liabilities starting in 2024 corresponded with a steep decline in the quick ratio, indicating a diminished liquidity cushion. Although there is some recovery towards the end of the observed periods, the recent trend suggests increased short-term financial pressure or strategic changes affecting working capital management.

The analysis of the financial metrics over the presented periods reveals several notable trends and shifts in the company's liquidity and short-term financial position.

Total Cash Assets

Total cash assets show significant fluctuation throughout the reported periods. Initially, cash assets increased from 6,444 million US dollars in early 2020 to a peak of 12,647 million by early 2023. This upward trend suggests an accumulation of liquid resources over three years, reflecting potentially improved operational cash flow or financing activities.

However, after reaching this peak, cash assets show a variable pattern with some decline, falling to 9,309 million by early 2025, followed by a slight recovery to approximately 10,718 million by mid-2025. The overall trend demonstrates volatility but maintains a relatively high level compared to the early periods.

Current Liabilities

Current liabilities demonstrate a moderate increase from 7,739 million US dollars in early 2020 to around 7,405 million in late 2021, remaining relatively stable through this timeframe. Starting in early 2024, a pronounced surge occurs, with liabilities jumping sharply to above 20,000 million US dollars, reaching peaks around 20,910 million in early 2025.

This significant rise in current liabilities suggests increased short-term obligations or possibly reclassification of liabilities, posing potential liquidity pressure on the company during these later periods.

Cash Ratio

The cash ratio, which measures the company's ability to cover current liabilities with cash and cash equivalents, initially displays healthy liquidity above 1.0, peaking around 1.94 in late 2021. This indicates that, during these years, the company held nearly twice the cash required to meet short-term liabilities.

Nonetheless, from early 2024 onwards, the cash ratio exhibits a sharp decline to values below 1.0, dropping as low as 0.45 in early 2025. This shift reflects reduced liquidity relative to current obligations, aligning with the simultaneous increase in current liabilities. Although there is a slight rebound in mid-2025 to 0.64, the ratio remains well below the levels observed in prior years.

Overall, the data indicate that while the company maintained strong liquidity positions through 2022 and early 2023, a marked increase in current liabilities in 2024 negatively impacted the cash ratio, signaling tighter short-term financial flexibility. The fluctuations in cash assets, combined with the surge in liabilities, suggest the company may be adjusting its capital structure or facing changes in working capital demands that require monitoring to assess ongoing liquidity risk.