Paramount Global (NASDAQ:PARA)

The financial ratios reveal several trends in the company's short-term liquidity over the five-year period.

Current Ratio

The current ratio showed a general increase from 1.48 in 2018 to a peak of 1.76 in 2021, indicating improving ability to cover short-term liabilities with current assets during this timeframe. However, in 2022, the ratio declined significantly to 1.23, suggesting a weakening liquidity position in the most recent year.

Quick Ratio

The quick ratio also experienced an upward trend from 0.95 in 2018 to a high of 1.4 in 2021, reflecting an improved capacity to meet short-term obligations without relying on inventory. Similar to the current ratio, it declined to 0.92 in 2022, which points to a reduced immediate liquidity buffer.

Cash Ratio

The cash ratio started very low at 0.07 in both 2018 and 2019 but then increased markedly to 0.36 in 2020 and further to 0.66 in 2021, indicating a substantial improvement in the company's cash and cash equivalents relative to current liabilities. Despite this improvement, the cash ratio decreased to 0.26 in 2022, suggesting less available cash to cover short-term obligations compared to the prior two years.

Overall, the data show that the company's liquidity strengthened progressively from 2018 through 2021, with all three ratios reaching their highest points in 2021. However, 2022 signals a reversal of these positive trends, with notable declines in the current, quick, and cash ratios. This indicates a less favorable liquidity position, warranting closer monitoring and potentially operational or financial adjustments to ensure adequate short-term financial stability.

Current Assets

Current assets displayed an overall increasing trend from 2018 through 2021, rising from 6,752 million US dollars to a peak of 16,676 million US dollars. However, in 2022, there was a noticeable decline to 13,734 million US dollars, indicating a reduction in liquidity or available short-term resources compared to the previous year.

Current Liabilities

Current liabilities showed significant variability over the observed period. Starting at 4,573 million US dollars in 2018, they nearly doubled by 2019, reaching 9,048 million US dollars. A slight decrease occurred in 2020 to 8,296 million US dollars, followed by an increase again in 2021 and 2022, reaching 9,479 million and then 11,191 million US dollars, respectively. This upward movement in recent years suggests a rising short-term obligation burden.

Current Ratio

The current ratio, representing the ability to cover current liabilities with current assets, fluctuated throughout the period. It declined from 1.48 in 2018 to 1.32 in 2019, indicating a weaker short-term liquidity position. This was followed by an improvement to 1.66 in 2020 and further strengthening to 1.76 in 2021, signaling enhanced liquidity and a more comfortable coverage of liabilities. However, in 2022, the ratio dropped substantively to 1.23, which suggests a comparatively tighter liquidity position and a reduction in the margin of safety against short-term obligations.

Summary Insights

The data indicates a period of growth in current assets accompanied by fluctuations in current liabilities. The current ratio trends point to improved liquidity in 2020 and 2021, but a notable decline in 2022. The reduction in current assets combined with increased current liabilities in 2022 could warrant further investigation into working capital management and short-term financial risk during that year.

Total Quick Assets

The total quick assets exhibited a marked upward trend from 2018 through 2021, rising from 4,363 million USD at the end of 2018 to a peak of 13,251 million USD by the end of 2021. However, this strong growth was followed by a notable decline in 2022, falling to 10,297 million USD. This suggests a possible reduction in highly liquid assets or short-term receivables in the most recent period after consistent growth in previous years.

Current Liabilities

Current liabilities increased substantially over the five-year period. Starting at 4,573 million USD at the end of 2018, liabilities nearly doubled to 9,048 million USD in 2019, then showed a modest decline in 2020 to 8,296 million USD. This was followed by an upward trajectory again in 2021 and 2022, reaching 11,191 million USD by the end of 2022. The fluctuations, especially the spike in 2019 and increments in later years, indicate increasing short-term obligations, with a peak in the latest year under review.

Quick Ratio

The quick ratio showed variability over the period, starting slightly below 1.0 at 0.95 in 2018. It dipped to 0.87 in 2019, reflecting a lower coverage of current liabilities by quick assets in that year. The ratio improved significantly in 2020 to 1.21, further increasing to 1.40 in 2021, indicating improved liquidity and stronger short-term financial health during these two years. However, in 2022, the quick ratio fell sharply back to 0.92, reflecting deteriorated liquidity conditions relative to liabilities, largely influenced by the decrease in quick assets and increase in current liabilities during that year.

Total Cash Assets

The total cash assets demonstrated significant fluctuations over the examined period. Starting at $322 million in 2018, the figure nearly doubled in 2019, reaching $632 million. A notable surge occurred in 2020, with cash assets increasing dramatically to $2,984 million. The upward trend continued in 2021, peaking at $6,267 million, almost doubling from the previous year. However, in 2022, there was a substantial decline, with total cash assets falling to $2,885 million, less than half of the prior year's amount. This pattern reflects a sharp increase in liquidity during 2020 and 2021 followed by a significant reduction in the most recent year.

Current Liabilities

Current liabilities exhibited a general upward trend throughout the period. Beginning at $4,573 million in 2018, liabilities nearly doubled to $9,048 million in 2019. Although there was a slight decrease in 2020 to $8,296 million, liabilities rose again in 2021 to $9,479 million and increased further in 2022 to $11,191 million. This steady rise in current liabilities indicates growing short-term obligations over time, with the highest level recorded in the latest period.

Cash Ratio

The cash ratio, indicative of short-term liquidity, remained low in 2018 and 2019 at 0.07. It increased markedly to 0.36 in 2020, nearly quintupling the previous year’s ratio, followed by a further rise to 0.66 in 2021, the highest level in the period studied. This suggests much stronger liquidity positions in these two years. However, the ratio decreased to 0.26 in 2022, indicating a reduction in the coverage of current liabilities by cash assets compared to the prior year, although still higher than in 2018 and 2019.