Costco Wholesale Corp. (NASDAQ:COST)

The analysis of liquidity ratios over the periods from 2020 to 2025 reveals notable trends in the company's short-term financial health.

Current Ratio

The current ratio displays a general downward trend from 1.13 in 2020 to a low of 0.97 in 2024, followed by a modest recovery to 1.03 in 2025. This indicates that although the company maintained a comfortable level of current assets to cover current liabilities in 2020, this buffer diminished over time and only slightly improved in the most recent period. The current ratio remaining near 1 suggests a marginal ability to meet short-term obligations with current assets.

Quick Ratio

The quick ratio, which excludes inventory from current assets, shows a clearer declining trajectory from 0.6 in 2020 to a trough of 0.39 in 2024, before increasing to 0.5 in 2025. This progressive decline signals a weakening liquidity position when inventories are not considered, implying greater reliance on less liquid assets to cover immediate liabilities. The partial rebound in 2025 suggests some improvement in liquid asset management.

Cash Ratio

The cash ratio, representing the most conservative liquidity measure, follows a similar path, dropping from 0.54 in 2020 to 0.31 in 2024, then rising to 0.41 in 2025. This pattern reflects a contraction in cash and cash equivalents relative to current liabilities over the years, indicating less readily available cash for immediate debt settlements. The increase in 2025 reflects a slight strengthening in cash reserves or a reduction in current liabilities.

Overall, the company’s liquidity ratios suggest a gradual tightening of short-term financial flexibility through 2024, with indicators showing improved liquidity in the latest fiscal period. Maintaining current ratios around or slightly above 1 and cautious management of liquid assets appear necessary to ensure sufficient coverage of short-term obligations going forward.

Current Assets

The current assets showed a consistent upward trend over the analyzed periods. Starting from 28,120 million USD, the value increased steadily each year, reaching 38,380 million USD by the latest period. This indicates an overall strengthening in the company's liquidity position in terms of available short-term resources.

Current Liabilities

Current liabilities also exhibited an increasing pattern across the years. Beginning at 24,844 million USD, these liabilities rose each period to 37,108 million USD by the last year. The growth in liabilities was significant and somewhat parallel to that of current assets, demonstrating rising short-term obligations.

Current Ratio

The current ratio displayed some variability but maintained levels close to 1 throughout the observed periods. It started at 1.13, then decreased to 1.00 and hovered slightly above or below this benchmark in subsequent years. Notably, the lowest recorded value was 0.97, indicating that at some points current liabilities slightly exceeded current assets, while the ratio recovered slightly to 1.03 in the final period. This stability near 1 suggests the company maintained a balanced liquidity situation, though with limited margins of safety.

Trend in Total Quick Assets

The total quick assets show some fluctuations with an overall tendency to increase over the reported periods. Starting at 14,855 million US dollars, the amount dips gradually to 13,290 million by 2022 before rising significantly to 17,519 million in 2023. After this peak, it decreases again to 13,865 million in 2024, followed by a recovery to 18,487 million in 2025, indicating volatility but an eventual upward movement.

Trend in Current Liabilities

Current liabilities demonstrate a steady and consistent increase throughout the years. Beginning at 24,844 million US dollars in 2020, liabilities grow every year and reach 37,108 million by 2025. This continuous rise suggests a growing short-term obligation load on the company.

Trend in Quick Ratio

The quick ratio displays a downward trend from 0.6 in 2020 to a low of 0.39 in 2024, indicating a declining ability to cover short-term liabilities with highly liquid assets during this span. However, in the last reported period, it improves to 0.5, suggesting some recovery in liquidity but still below the initial 2020 level.

Overall Analysis

The data reveals a tension between increasing current liabilities and fluctuating quick assets, which impacts the quick ratio negatively for most of the periods under review. Despite the volatility in quick assets, the steady rise in liabilities outpaces these assets, resulting in generally weakened liquidity until a partial rebound in 2025. This suggests that while the company has been increasing its liquid assets at times, the growth in short-term liabilities has posed challenges for maintaining robust liquidity ratios over time.

Total Cash Assets

The total cash assets demonstrate a fluctuating pattern over the examined period. Initially, there is a decline from 13,305 million US dollars to 11,049 million US dollars between August 2020 and August 2022. Subsequently, cash assets increase significantly to 15,234 million by September 2023, decrease again to 11,144 million in September 2024, and rise once more to 15,284 million as of August 2025. This volatility suggests variable liquidity management or operational cash flow changes across the years.

Current Liabilities

Current liabilities exhibit a consistent upward trend throughout the period. Starting from 24,844 million US dollars in August 2020, the amount progressively rises each year, reaching 37,108 million by August 2025. This steady increase may reflect growing short-term obligations or increasing operational scale and financial leverage.

Cash Ratio

The cash ratio, which measures the ability to cover current liabilities with cash and cash equivalents, generally declines from 0.54 in August 2020 to a low of 0.31 in September 2024. However, there are intermittent recoveries in this ratio, such as increases to 0.45 in September 2023 and 0.41 in August 2025. Despite these rebounds, the ratio remains below the starting level, indicating a weakening liquidity position relative to current liabilities over time.