Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
DexCom Inc., liquidity ratios
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.99 | 5.11 | 5.58 | 5.47 | 7.64 | |
| Quick ratio | 1.72 | 4.50 | 5.11 | 5.05 | 7.25 | |
| Cash ratio | 1.34 | 3.79 | 4.41 | 4.26 | 6.23 |
Based on: 10-K (reporting date: 2022-12-31), 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).
A comprehensive downward trend in liquidity is observed between December 31, 2018, and December 31, 2022. While the organization maintained exceptionally high liquidity buffers during the first four years of the period, a significant contraction occurred in the final year.
- Current Ratio
- The current ratio declined from 7.64 in 2018 to 1.99 by the end of 2022. After a sharp initial decrease in 2019, the ratio remained relatively stable between 5.11 and 5.58 from 2019 through 2021, before experiencing a steep decline in the final year.
- Quick Ratio
- The quick ratio followed a trajectory nearly identical to the current ratio, falling from 7.25 in 2018 to 1.72 in 2022. The minimal variance between the current and quick ratios suggests that inventory comprises a small fraction of the total current assets.
- Cash Ratio
- The cash ratio decreased from 6.23 in 2018 to 1.34 in 2022. The consistent alignment of the cash ratio with the other liquidity metrics indicates that a substantial portion of the company's liquidity is held in cash or cash equivalents.
The convergence of these three ratios indicates a high reliance on cash for meeting short-term obligations rather than inventory or other current assets. Although the sharp decline in 2022 represents a significant shift in the financial profile, all ratios remain above 1.0, implying that the organization retains sufficient liquidity to cover its current liabilities.
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Current Ratio
DexCom Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 3,668,800) | 3,684,400) | 3,424,800) | 1,969,400) | 1,699,500) | |
| Current liabilities | 1,839,300) | 720,800) | 614,100) | 360,200) | 222,400) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.99 | 5.11 | 5.58 | 5.47 | 7.64 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Abbott Laboratories | 1.63 | 1.85 | — | — | — | |
| Elevance Health Inc. | 1.40 | 1.47 | — | — | — | |
| Intuitive Surgical Inc. | 4.40 | 5.08 | — | — | — | |
| Medtronic PLC | 1.86 | 2.65 | — | — | — | |
| UnitedHealth Group Inc. | 0.77 | 0.79 | — | — | — | |
| Current Ratio, Sector | ||||||
| Health Care Equipment & Services | 1.13 | 1.22 | — | — | — | |
| Current Ratio, Industry | ||||||
| Health Care | 1.23 | 1.31 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Current ratio = Current assets ÷ Current liabilities
= 3,668,800 ÷ 1,839,300 = 1.99
2 Click competitor name to see calculations.
A comprehensive analysis of the liquidity position from 2018 to 2022 reveals a significant downward trend in the current ratio, signaling a contraction in short-term liquidity. While the company maintained an exceptionally high liquidity cushion for several years, the most recent period shows a marked shift in the relationship between short-term assets and obligations.
- Current Assets Trend
- Current assets experienced substantial growth between 2018 and 2021, increasing from 1,699,500 thousand US$ to a peak of 3,684,400 thousand US$. This growth slowed significantly in 2022, with assets remaining relatively stagnant at 3,668,800 thousand US$.
- Current Liabilities Trajectory
- Short-term obligations grew steadily from 2018 through 2021, rising from 222,400 thousand US$ to 720,800 thousand US$. However, a sharp acceleration occurred in 2022, with current liabilities increasing to 1,839,300 thousand US$, representing a more than 150% increase within a single fiscal year.
- Current Ratio Interpretation
- The current ratio declined from a high of 7.64 in 2018 to 1.99 in 2022. Between 2019 and 2021, the ratio remained stable above 5.0, indicating an oversized liquidity position. The precipitous drop to 1.99 in 2022 is directly attributable to the surge in current liabilities, which outpaced the growth of current assets. Despite this decline, the ratio remains above 1.0, suggesting that the company still possesses sufficient short-term assets to cover its immediate liabilities.
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Quick Ratio
DexCom Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 642,300) | 1,052,600) | 817,600) | 446,200) | 1,137,000) | |
| Short-term marketable securities | 1,813,900) | 1,678,600) | 1,890,100) | 1,087,100) | 248,600) | |
| Accounts receivable, net | 713,300) | 514,300) | 428,500) | 286,300) | 226,700) | |
| Total quick assets | 3,169,500) | 3,245,500) | 3,136,200) | 1,819,600) | 1,612,300) | |
| Current liabilities | 1,839,300) | 720,800) | 614,100) | 360,200) | 222,400) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.72 | 4.50 | 5.11 | 5.05 | 7.25 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Abbott Laboratories | 1.06 | 1.28 | — | — | — | |
| Elevance Health Inc. | 1.27 | 1.33 | — | — | — | |
| Intuitive Surgical Inc. | 3.56 | 4.34 | — | — | — | |
| Medtronic PLC | 1.30 | 1.91 | — | — | — | |
| UnitedHealth Group Inc. | 0.70 | 0.72 | — | — | — | |
| Quick Ratio, Sector | ||||||
| Health Care Equipment & Services | 0.95 | 1.04 | — | — | — | |
| Quick Ratio, Industry | ||||||
| Health Care | 0.93 | 1.00 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 3,169,500 ÷ 1,839,300 = 1.72
2 Click competitor name to see calculations.
The liquidity profile from 2018 to 2022 reveals a significant downward trend in the quick ratio, indicating a reduction in the available liquidity cushion used to meet short-term obligations.
- Quick Asset Trends
- Total quick assets experienced substantial growth between 2018 and 2021, rising from 1.61 billion to 3.25 billion. This indicates a period of aggressive liquidity accumulation. However, this trend reversed slightly in 2022, with quick assets declining to 3.17 billion.
- Current Liability Trends
- Current liabilities increased consistently over the five-year period. A steady climb was observed from 222.4 million in 2018 to 720.8 million in 2021, followed by a sharp acceleration in 2022, where liabilities surged to 1.84 billion. This rapid increase in short-term obligations is the primary catalyst for the decline in the overall liquidity ratio.
- Quick Ratio Analysis
- The quick ratio shifted from a position of extreme liquidity in 2018, at 7.25, to 1.72 by the end of 2022. While the ratio remains above the 1.0 threshold—suggesting that liquid assets still exceed current liabilities—the precipitous drop between 2021 and 2022 highlights a marked deterioration in the company's immediate financial flexibility.
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Cash Ratio
DexCom Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 642,300) | 1,052,600) | 817,600) | 446,200) | 1,137,000) | |
| Short-term marketable securities | 1,813,900) | 1,678,600) | 1,890,100) | 1,087,100) | 248,600) | |
| Total cash assets | 2,456,200) | 2,731,200) | 2,707,700) | 1,533,300) | 1,385,600) | |
| Current liabilities | 1,839,300) | 720,800) | 614,100) | 360,200) | 222,400) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.34 | 3.79 | 4.41 | 4.26 | 6.23 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Abbott Laboratories | 0.66 | 0.78 | — | — | — | |
| Elevance Health Inc. | 0.86 | 0.95 | — | — | — | |
| Intuitive Surgical Inc. | 2.90 | 3.66 | — | — | — | |
| Medtronic PLC | 0.85 | 1.27 | — | — | — | |
| UnitedHealth Group Inc. | 0.36 | 0.36 | — | — | — | |
| Cash Ratio, Sector | ||||||
| Health Care Equipment & Services | 0.58 | 0.64 | — | — | — | |
| Cash Ratio, Industry | ||||||
| Health Care | 0.54 | 0.60 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 2,456,200 ÷ 1,839,300 = 1.34
2 Click competitor name to see calculations.
The liquidity profile of the company demonstrates a significant shift in its short-term solvency position between 2018 and 2022. While total cash assets experienced a general upward trajectory until 2021, the growth in current liabilities has consistently outpaced the accumulation of cash, leading to a marked reduction in the cash ratio.
- Total Cash Assets Trends
- Cash assets increased from 1.39 billion in 2018 to a peak of approximately 2.73 billion in 2021. A moderate contraction was observed in 2022, with assets decreasing to 2.46 billion.
- Current Liabilities Trends
- A consistent upward trend is observed in current liabilities, which rose from 222.4 million in 2018 to 720.8 million in 2021. A substantial increase occurred in 2022, with liabilities spiking to 1.84 billion, representing a significant escalation in short-term obligations.
- Cash Ratio Analysis
- The cash ratio declined from a high of 6.23 in 2018 to 1.34 in 2022. This downward trajectory indicates a transition from an extremely liquid position to one that, while still maintaining a ratio above 1.0, is considerably more leveraged. The most acute decline occurred between 2021 and 2022, where the ratio dropped from 3.79 to 1.34, primarily driven by the surge in current liabilities.
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