Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
ON Semiconductor Corp., liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Current ratio | 2.71 | 2.78 | 2.45 | 1.90 | 1.66 | |
| Quick ratio | 1.57 | 1.82 | 1.40 | 1.05 | 0.88 | |
| Cash ratio | 1.14 | 1.42 | 0.88 | 0.65 | 0.49 |
Based on: 10-K (reporting date: 2023-12-31), 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).
The analysis of the liquidity ratios over the five-year period reveals an overall improvement in the company's short-term financial health, though with some recent moderation in certain areas.
- Current Ratio
- The current ratio exhibits a steady upward trend from 1.66 in 2019 to a peak of 2.78 in 2022, followed by a slight decline to 2.71 in 2023. This indicates that the company's ability to cover its short-term liabilities with its current assets has generally strengthened over the period, suggesting improved liquidity and operational efficiency. The minor decrease in 2023, however, signals a small reduction in this buffer.
- Quick Ratio
- The quick ratio follows a similar pattern, rising from 0.88 in 2019 to a high of 1.82 in 2022 before decreasing to 1.57 in 2023. This ratio, which excludes inventory from current assets, demonstrates an increasing capacity to meet immediate liabilities with more liquid assets such as cash and receivables. The decrease in 2023 may reflect changes in the composition of liquid assets or an increase in short-term liabilities.
- Cash Ratio
- The cash ratio shows the most significant relative growth, improving from 0.49 in 2019 to 1.42 in 2022, indicating a substantial increase in cash and cash equivalents relative to current liabilities. In 2023, the ratio declines to 1.14, though remaining comfortably above 1, suggesting that the company maintained a strong cash position capable of covering current liabilities without relying on other current assets. The reduction in 2023 could point to increased cash utilization or higher liabilities.
In summary, the liquidity position strengthened consistently through 2022 across all three metrics, reflecting enhanced financial stability and resource availability for short-term obligations. The slight reversals in 2023, while still leaving ratios at healthy levels, warrant monitoring to determine if this is a temporary adjustment or the beginning of a different liquidity trend.
Current Ratio
ON Semiconductor Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 5,912,300) | 5,729,400) | 3,781,600) | 3,184,100) | 3,020,000) | |
| Current liabilities | 2,183,600) | 2,061,400) | 1,543,400) | 1,674,500) | 1,818,400) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 2.71 | 2.78 | 2.45 | 1.90 | 1.66 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 2.51 | 2.36 | 2.02 | 2.54 | — | |
| Analog Devices Inc. | 1.37 | 2.02 | 1.94 | 1.84 | 1.32 | |
| Applied Materials Inc. | 2.60 | 2.16 | 2.54 | 3.00 | 2.30 | |
| Broadcom Inc. | 2.82 | 2.62 | 2.64 | 1.87 | 1.44 | |
| Intel Corp. | 1.54 | 1.57 | 2.10 | 1.91 | — | |
| KLA Corp. | 2.24 | 2.50 | 2.71 | 2.78 | 2.44 | |
| Lam Research Corp. | 3.16 | 2.69 | 3.30 | 3.43 | 3.61 | |
| Micron Technology Inc. | 4.46 | 2.89 | 3.10 | 2.71 | 2.58 | |
| NVIDIA Corp. | 3.52 | 6.65 | 4.09 | 7.67 | — | |
| Qualcomm Inc. | 2.33 | 1.75 | 1.68 | 2.14 | 1.88 | |
| Texas Instruments Inc. | 4.55 | 4.70 | 5.33 | 4.28 | — | |
| Current Ratio, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 2.45 | 2.34 | 2.47 | 2.47 | — | |
| Current Ratio, Industry | ||||||
| Information Technology | 1.41 | 1.37 | 1.55 | 1.71 | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Current ratio = Current assets ÷ Current liabilities
= 5,912,300 ÷ 2,183,600 = 2.71
2 Click competitor name to see calculations.
The financial data indicates a positive trend in the liquidity position over the period from 2019 to 2023.
- Current Assets
- The current assets exhibit a steady increase each year, rising from approximately $3.02 billion in 2019 to about $5.91 billion in 2023. This growth suggests an enhancement in short-term asset holdings, improving the company's ability to cover short-term obligations.
- Current Liabilities
- Current liabilities show some fluctuation but remain generally stable relative to assets. Beginning at roughly $1.82 billion in 2019, the liabilities decreased slightly in 2020 and 2021, reaching around $1.54 billion, followed by an increase in 2022 and 2023 to approximately $2.06 billion and $2.18 billion respectively. Despite these increases in the latter years, the rise is proportionally smaller compared to the growth in current assets.
- Current Ratio
- The current ratio, a key measure of short-term financial health, improves consistently over the five-year period. Starting at 1.66 in 2019, it increased to 1.90 in 2020, then to 2.45 in 2021, peaking at 2.78 in 2022 before a slight decline to 2.71 in 2023. Ratios above 2.0 generally indicate a strong liquidity position, and the figures demonstrate the company's growing capacity to meet current liabilities with current assets.
In summary, the data reveals a strengthening liquidity profile, with current assets expanding significantly faster than current liabilities. This improvement is reflected in the current ratio, which consistently remains above 1.5 and approaches 3.0 in recent years, indicating enhanced short-term financial stability and reduced liquidity risk.
Quick Ratio
ON Semiconductor Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 2,483,000) | 2,919,000) | 1,352,600) | 1,080,700) | 894,200) | |
| Receivables, net | 935,400) | 842,300) | 809,400) | 676,000) | 705,000) | |
| Total quick assets | 3,418,400) | 3,761,300) | 2,162,000) | 1,756,700) | 1,599,200) | |
| Current liabilities | 2,183,600) | 2,061,400) | 1,543,400) | 1,674,500) | 1,818,400) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.57 | 1.82 | 1.40 | 1.05 | 0.88 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 1.67 | 1.57 | 1.49 | 1.81 | — | |
| Analog Devices Inc. | 0.76 | 1.34 | 1.24 | 1.31 | 0.85 | |
| Applied Materials Inc. | 1.63 | 1.17 | 1.64 | 1.95 | 1.38 | |
| Broadcom Inc. | 2.34 | 2.18 | 2.27 | 1.56 | 1.21 | |
| Intel Corp. | 1.01 | 1.01 | 1.38 | 1.24 | — | |
| KLA Corp. | 1.33 | 1.57 | 1.81 | 1.82 | 1.54 | |
| Lam Research Corp. | 1.95 | 1.72 | 2.11 | 2.22 | 2.16 | |
| Micron Technology Inc. | 2.53 | 1.92 | 2.17 | 1.82 | 1.74 | |
| NVIDIA Corp. | 2.61 | 5.96 | 3.56 | 7.04 | — | |
| Qualcomm Inc. | 1.51 | 1.01 | 1.34 | 1.75 | 1.65 | |
| Texas Instruments Inc. | 3.12 | 3.67 | 4.45 | 3.34 | — | |
| Quick Ratio, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 1.63 | 1.62 | 1.79 | 1.78 | — | |
| Quick Ratio, Industry | ||||||
| Information Technology | 1.12 | 1.08 | 1.30 | 1.46 | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 3,418,400 ÷ 2,183,600 = 1.57
2 Click competitor name to see calculations.
- Total quick assets
- The total quick assets demonstrated a generally increasing trend from 2019 through 2023, with values rising from approximately 1.6 billion US dollars in 2019 to a peak of around 3.76 billion in 2022. In 2023, a slight decline to about 3.42 billion was observed, yet the level remained significantly higher than in the earlier years.
- Current liabilities
- Current liabilities exhibited a fluctuating pattern over the period. Starting at about 1.82 billion in 2019, liabilities decreased steadily to approximately 1.54 billion by the end of 2021. However, in 2022, current liabilities increased sharply to 2.06 billion and continued to rise slightly to roughly 2.18 billion in 2023.
- Quick ratio
- The quick ratio showed a progressive improvement from 0.88 in 2019 to a peak of 1.82 in 2022, indicating enhanced short-term liquidity and an increased ability to cover current liabilities with quick assets. In 2023, the quick ratio decreased somewhat to 1.57, but still remained above 1.0, reflecting a solid liquidity position.
- Overall Assessment
- The company’s liquidity position has strengthened markedly over the years, with quick assets increasing considerably and resulting in elevated quick ratios above the critical threshold of 1.0 from 2020 onwards. While current liabilities were initially reduced until 2021, a notable rise occurred in 2022 and 2023, which coincided with the highest quick asset values and liquidity ratios, suggesting active management of working capital. The slight reduction in quick assets and quick ratio in 2023 indicates a modest withdrawal of liquidity buffers but does not reflect any immediate concern given the still adequate coverage of short-term obligations.
Cash Ratio
ON Semiconductor Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 2,483,000) | 2,919,000) | 1,352,600) | 1,080,700) | 894,200) | |
| Total cash assets | 2,483,000) | 2,919,000) | 1,352,600) | 1,080,700) | 894,200) | |
| Current liabilities | 2,183,600) | 2,061,400) | 1,543,400) | 1,674,500) | 1,818,400) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.14 | 1.42 | 0.88 | 0.65 | 0.49 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 0.86 | 0.92 | 0.85 | 0.95 | — | |
| Analog Devices Inc. | 0.30 | 0.60 | 0.71 | 0.77 | 0.43 | |
| Applied Materials Inc. | 0.93 | 0.35 | 0.86 | 1.29 | 0.81 | |
| Broadcom Inc. | 1.92 | 1.76 | 1.94 | 1.20 | 0.73 | |
| Intel Corp. | 0.89 | 0.88 | 1.03 | 0.97 | — | |
| KLA Corp. | 0.87 | 0.94 | 1.19 | 1.17 | 0.98 | |
| Lam Research Corp. | 1.28 | 0.77 | 1.25 | 1.55 | 1.54 | |
| Micron Technology Inc. | 2.01 | 1.24 | 1.34 | 1.23 | 1.24 | |
| NVIDIA Corp. | 2.03 | 4.89 | 2.95 | 6.11 | — | |
| Qualcomm Inc. | 1.18 | 0.54 | 1.04 | 1.29 | 1.37 | |
| Texas Instruments Inc. | 2.58 | 3.04 | 3.79 | 2.75 | — | |
| Cash Ratio, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 1.23 | 1.15 | 1.30 | 1.32 | — | |
| Cash Ratio, Industry | ||||||
| Information Technology | 0.71 | 0.66 | 0.88 | 1.06 | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 2,483,000 ÷ 2,183,600 = 1.14
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets increased steadily from 894,200 thousand US dollars in 2019 to 1,352,600 thousand US dollars in 2021, showing consistent growth over this period. A notable surge occurred in 2022, with cash assets reaching 2,919,000 thousand US dollars, more than doubling the prior year’s figure. However, in 2023, the cash assets declined to 2,483,000 thousand US dollars, which, although a reduction from the peak, remains significantly higher than earlier years.
- Current liabilities
- Current liabilities showed a general decreasing trend from 1,818,400 thousand US dollars in 2019 to 1,543,400 thousand US dollars in 2021. This downward trend was reversed starting in 2022, with liabilities rising sharply to 2,061,400 thousand US dollars and continuing to increase to 2,183,600 thousand US dollars in 2023, surpassing the levels observed in the earlier years.
- Cash ratio
- The cash ratio improved consistently from 0.49 in 2019 to 0.88 in 2021, indicating a strengthening liquidity position. This ratio further increased substantially to 1.42 in 2022, reflecting the significant accumulation of cash assets relative to current liabilities. In 2023, the ratio decreased to 1.14, still maintaining a solid liquidity buffer above 1, which typically signifies the company holds more cash and cash equivalents than its current liabilities.