Kraft Foods Group Inc. (NASDAQ:KRFT)

Current Ratio

The current ratio exhibited a decrease over the three-year period. It started at 1.34 in 2012, increased slightly to 1.44 in 2013, but then declined significantly to 1.00 by the end of 2014. This suggests a diminishing ability to cover short-term liabilities with current assets, which may indicate tighter liquidity management or increased short-term obligations in 2014.

Quick Ratio

The quick ratio showed a similar pattern, beginning at 0.65 in 2012 and improving to 0.80 in 2013, before falling to 0.50 in 2014. As the quick ratio excludes inventory from current assets, this decline in 2014 reflects a reduced buffer of liquid assets relative to current liabilities, reinforcing the observation of declining short-term liquidity during that year.

Cash Ratio

The cash ratio followed the overall downward trend in liquidity ratios. It rose from 0.35 in 2012 to 0.49 in 2013, indicating an improved capacity to meet short-term liabilities with cash and cash equivalents. However, in 2014, the ratio dropped markedly to 0.27, signaling a significant reduction in the most liquid assets available to the company at year-end.

Summary of Liquidity Trends

Across all three measured liquidity ratios, there was an improvement from 2012 to 2013, followed by a notable decline in 2014. This pattern may reflect changes in working capital management, operational cash flows, or an increase in current liabilities in 2014. The substantial decrease in liquidity metrics in 2014 warrants further investigation to identify underlying causes and assess potential impacts on the company's short-term financial stability.

The current ratio exhibited fluctuating performance over the analyzed period. Initially, the ratio increased before declining significantly in the final year.

Current Ratio Trend

The current ratio began at 1.34 in 2012, increasing to 1.44 in 2013. This indicates an improved ability to cover short-term obligations with short-term assets during that period. However, a substantial decrease was observed in 2014, with the ratio falling to 1.00. This suggests a diminished capacity to meet short-term liabilities with current assets in the most recent year.

Underlying Components

Current assets remained relatively stable, fluctuating between US$4,791 million and US$4,908 million. Current liabilities decreased from US$3,606 million in 2012 to US$3,410 million in 2013, contributing to the initial increase in the current ratio. However, current liabilities increased considerably to US$4,773 million in 2014, driving the subsequent decline in the ratio.

Implications

The decrease in the current ratio in 2014 warrants further investigation. A ratio of 1.00 indicates that current assets are exactly equal to current liabilities, leaving no buffer for unexpected short-term obligations. This could potentially signal increased liquidity risk. The increase in current liabilities appears to be the primary driver of this change, and understanding the reasons behind this increase is crucial.

Total quick assets

The total quick assets showed an increase from 2344 million US dollars in 2012 to 2734 million US dollars in 2013, representing a growth phase. However, in 2014, there was a noticeable decline to 2373 million US dollars, nearly reverting to the 2012 level.

Current liabilities

Current liabilities decreased from 3606 million US dollars in 2012 to 3410 million US dollars in 2013, indicating some improvement in short-term obligations. Nevertheless, in 2014, current liabilities surged significantly to 4773 million US dollars, marking a considerable increase compared to the previous years.

Quick ratio

The quick ratio improved from 0.65 in 2012 to 0.8 in 2013, suggesting enhanced short-term liquidity and a stronger ability to meet immediate liabilities without relying on inventory. However, in 2014, the quick ratio fell sharply to 0.5, reflecting a deterioration in liquidity and potential challenges in covering current liabilities with quick assets.

Total cash assets

The total cash assets exhibited variability over the three-year period. There was an increase from $1,255 million at the end of 2012 to $1,686 million at the end of 2013, indicating improved liquidity or cash generation during that year. However, the value declined in 2014 to $1,293 million, suggesting a reduction in cash reserves possibly due to higher expenditures or investments.

Current liabilities

Current liabilities demonstrated a fluctuating but overall upward trend. Initially, liabilities decreased slightly from $3,606 million in 2012 to $3,410 million in 2013, indicating perhaps some short-term debt repayment or reduction in obligations. Subsequently, there was a significant increase to $4,773 million in 2014, which might reflect increased short-term borrowings or other current obligations.

Cash ratio

The cash ratio, defined as cash and cash equivalents divided by current liabilities, showed considerable variation. It improved from 0.35 in 2012 to 0.49 in 2013, reflecting stronger liquidity relative to current liabilities. However, in 2014, the cash ratio declined sharply to 0.27, indicating a weakened liquidity position with less cash available to cover short-term liabilities.