Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Celgene Corp., liquidity ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Current ratio | 2.23 | 4.99 | 3.67 | 4.77 | 4.60 | |
| Quick ratio | 2.00 | 4.67 | 3.24 | 4.05 | 4.13 | |
| Cash ratio | 1.49 | 4.03 | 2.69 | 3.33 | 3.57 |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
- Current Ratio
- The current ratio exhibited fluctuations over the five-year period. Beginning at 4.6 in 2014, it increased slightly to 4.77 in 2015 before declining to 3.67 in 2016. A recovery followed in 2017, with a peak at 4.99; however, the ratio sharply decreased to 2.23 by 2018. Overall, the trend suggests variability in the company's short-term liquidity, with a notable decline by the end of the period.
- Quick Ratio
- Following a somewhat similar pattern to the current ratio, the quick ratio started at 4.13 in 2014 and remained relatively stable at 4.05 in 2015. It then dropped to 3.24 in 2016, rose again to 4.67 in 2017, but subsequently fell to 2.00 by the end of 2018. This indicates a reduction in the company’s ability to cover immediate liabilities with liquid assets during the last year, despite earlier resilience.
- Cash Ratio
- The cash ratio decreased steadily from 3.57 in 2014 to 2.69 in 2016, showing declining cash and cash equivalents relative to current liabilities. In 2017, there was an improvement to 4.03, but a significant drop followed in 2018, reaching 1.49, the lowest level in the observed timeframe. This points to a diminishing cash buffer available for immediate obligation coverage in the most recent year assessed.
In summary, the liquidity ratios reveal a volatile liquidity position with a period of strengthening up to 2017, followed by a pronounced decline in 2018 across all measures. The reduced ratios in the final year indicate potential challenges in meeting short-term liabilities with available assets, emphasizing a need for careful monitoring of working capital management moving forward.
Current Ratio
Celgene Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 9,067) | 14,892) | 10,868) | 9,401) | 9,713) | |
| Current liabilities | 4,057) | 2,987) | 2,959) | 1,969) | 2,112) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 2.23 | 4.99 | 3.67 | 4.77 | 4.60 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Current ratio = Current assets ÷ Current liabilities
= 9,067 ÷ 4,057 = 2.23
2 Click competitor name to see calculations.
- Current Assets
- The current assets showed a fluctuating trend over the analyzed period. Beginning at 9,713 million US dollars at the end of 2014, they slightly declined to 9,401 million in 2015. A notable increase followed in 2016 and 2017, reaching a peak of 14,892 million US dollars before decreasing significantly in 2018 to 9,067 million. This pattern indicates variability in the liquidity resources held in the short term, with the highest liquidity position observed in 2017.
- Current Liabilities
- Current liabilities displayed a generally upward trend throughout the period. Starting at 2,112 million US dollars in 2014, there was a slight decrease in 2015 to 1,969 million. From 2016 onwards, current liabilities increased consistently, reaching 4,057 million US dollars by the end of 2018. This indicates an increasing short-term obligation load in recent years, particularly significant in 2018.
- Current Ratio
- The current ratio reflects the company's short-term liquidity and ability to cover current liabilities with current assets. The ratio was notably high at 4.6 in 2014, slightly increasing to 4.77 in 2015. However, in 2016, the ratio decreased to 3.67 despite an increase in current assets, primarily due to higher current liabilities. The ratio peaked again in 2017 at 4.99, coinciding with the peak in current assets and relatively stable liabilities. By 2018, the current ratio declined markedly to 2.23, mainly attributable to the combination of decreased current assets and increased current liabilities. Despite this reduction, the ratio remains above 1, suggesting adequate coverage of short-term liabilities but at a less comfortable margin compared to previous years.
- Summary
- Overall, the company experienced variability in its short-term liquidity position. The significant increase in current assets in 2017 improved liquidity, yet the subsequent decrease in 2018 coupled with rising current liabilities reduced the current ratio, indicating a tighter liquidity position. The upward trend in current liabilities highlights growing short-term obligations, which may require attention to maintain solvency and liquidity stability.
Quick Ratio
Celgene Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 4,234) | 7,013) | 6,170) | 4,880) | 4,122) | |
| Debt securities available-for-sale | 496) | 3,219) | —) | —) | —) | |
| Equity investments with readily determinable fair values | 1,312) | 1,810) | —) | —) | —) | |
| Marketable securities available-for-sale | —) | —) | 1,800) | 1,672) | 3,425) | |
| Accounts receivable, net of allowances | 2,066) | 1,921) | 1,621) | 1,421) | 1,167) | |
| Total quick assets | 8,108) | 13,963) | 9,590) | 7,973) | 8,713) | |
| Current liabilities | 4,057) | 2,987) | 2,959) | 1,969) | 2,112) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 2.00 | 4.67 | 3.24 | 4.05 | 4.13 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 8,108 ÷ 4,057 = 2.00
2 Click competitor name to see calculations.
The financial data reveals notable variations in liquidity over the five-year period ending December 31, 2018. Quick assets fluctuated, showing an initial decrease from 8713 million USD in 2014 to 7973 million USD in 2015, followed by a significant increase peaking at 13963 million USD in 2017 before sharply declining to 8108 million USD in 2018.
Current liabilities exhibited a more consistent upward trend throughout the period. Starting at 2112 million USD in 2014, they rose slightly to 1969 million USD in 2015, then increased markedly to 2959 million USD in 2016, maintained a comparable level at 2987 million USD in 2017, and culminated at 4057 million USD in 2018.
The quick ratio, a key indicator of short-term liquidity, mirrored the trends in quick assets and current liabilities but with more pronounced volatility. It remained relatively stable around 4.00 or higher from 2014 through 2017, reaching its highest point at 4.67 in 2017. However, it dropped significantly in 2018 to 2.00, indicating a substantial reduction in the company’s immediate liquidity relative to its current liabilities.
- Summary of Trends:
- - Quick assets saw a rise followed by a sharp decline in the final year.
- - Current liabilities steadily increased each year except a minor dip in 2015.
- - The quick ratio remained robust from 2014 to 2017 but dropped drastically in 2018, suggesting deteriorating liquidity conditions.
In conclusion, the firm's liquidity position strengthened initially but weakened considerably in 2018 due to a combination of decreased quick assets and increased current liabilities. This could imply potential challenges in meeting short-term obligations during the last year of the observed period.
Cash Ratio
Celgene Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 4,234) | 7,013) | 6,170) | 4,880) | 4,122) | |
| Debt securities available-for-sale | 496) | 3,219) | —) | —) | —) | |
| Equity investments with readily determinable fair values | 1,312) | 1,810) | —) | —) | —) | |
| Marketable securities available-for-sale | —) | —) | 1,800) | 1,672) | 3,425) | |
| Total cash assets | 6,042) | 12,042) | 7,970) | 6,552) | 7,547) | |
| Current liabilities | 4,057) | 2,987) | 2,959) | 1,969) | 2,112) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.49 | 4.03 | 2.69 | 3.33 | 3.57 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 6,042 ÷ 4,057 = 1.49
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets exhibit fluctuations over the analyzed period. Initially, there is a decrease from approximately 7,547 million USD in 2014 to 6,552 million USD in 2015. This is followed by an increase reaching a peak of 12,042 million USD in 2017. However, in 2018, a significant decline to 6,042 million USD is observed, nearly halving from the previous year. This pattern indicates variability in liquidity holdings with a notable surge in 2017 before a sharp reduction in 2018.
- Current liabilities
- Current liabilities present a generally upward trend over the five-year span. Starting at 2,112 million USD in 2014, liabilities slightly decrease to 1,969 million USD in 2015 but subsequently rise each year, reaching 4,057 million USD in 2018. The increase is particularly marked between 2017 and 2018, indicating growing short-term financial obligations during the later years.
- Cash ratio
- The cash ratio, representing the company's ability to cover current liabilities with cash assets, displays considerable variability. It declines from 3.57 in 2014 to 2.69 in 2016, suggesting reduced liquidity coverage. A strong recovery occurs in 2017 with the ratio rising to 4.03, reflecting improved coverage coinciding with the peak in cash assets. However, the ratio drops sharply to 1.49 in 2018, signaling decreased liquidity relative to obligations. Despite remaining above 1, the substantial reduction points to diminished short-term financial safety.
- Overall insights
- The financial data indicate that liquidity and short-term financial health have experienced considerable variation. A peak in cash assets and improved liquidity ratios in 2017 coincide, suggesting a period of strong liquidity position. However, the subsequent decline in cash assets coupled with increasing current liabilities in 2018 reduces the cash ratio considerably, potentially signaling heightened risk in meeting short-term obligations. Management may need to monitor liquidity closely and address the rise in current liabilities to ensure financial stability.