Starbucks Corp. (NASDAQ:SBUX)

The analysis of the liquidity ratios over the examined periods reveals several noteworthy trends and fluctuations. The focus on current ratio, quick ratio, and cash ratio provides a comprehensive view of the company's short-term financial health and its ability to meet current obligations.

Current Ratio

The current ratio starts at a low point of 0.68 and generally exhibits an upward trend until reaching a peak of 1.2. This peak indicates a stronger ability to cover short-term liabilities with current assets during that period. However, after this peak, the ratio declines again, hovering mostly below 1.0 with some short-term increases, and ends at 0.76. The variability suggests fluctuating liquidity conditions, with periods of both improved and weakened current asset coverage.

Quick Ratio

Similar to the current ratio, the quick ratio improves from 0.46 to a high of 0.93, signaling enhanced liquidity without relying on inventory. From there, it experiences a decline and maintains values generally between 0.4 and 0.6 in the later periods. The decline after the peak implies that the company’s most liquid assets available to cover immediate liabilities fluctuate and tend to weaken relative to earlier improvement phases.

Cash Ratio

The cash ratio shows an initial increase from 0.36 to 0.81, which indicates a growing cash and cash equivalents base relative to current liabilities. Afterwards, a downward trend follows, with cash liquidity settling mostly between 0.29 and 0.44. This reduction suggests a contraction in the most liquid reserve, implying tighter cash availability for meeting urgent obligations as time progresses.

Overall, the initial part of the timeframe demonstrates strengthening liquidity across all ratios, potentially reflecting improved operational cash flow or effective working capital management. The subsequent decline and volatility in all three ratios highlight potential challenges in maintaining liquidity strength consistently. These fluctuations could stem from changes in operating conditions, investment activities, or financing decisions affecting asset composition and liability structure.

The ratios frequently remain below the ideal benchmark of 1.0, particularly in later periods, which can be indicative of a conservative liquidity position, although the company may rely on efficient cash flow management to sustain operations without holding excessive liquid assets. Close monitoring is advisable to ensure that liquidity remains sufficient to meet obligations without compromising operational flexibility.

Current Assets

The current assets demonstrated a fluctuating trend over the observed periods. Starting at approximately $5.9 billion, the value rose significantly to around $7.8 billion by late 2020, indicating an expansion in short-term resources. Afterwards, current assets fluctuated, experiencing declines and moderate growth phases. Notably, the figure decreased toward mid-2024 but ended with a noticeable increase to about $8.4 billion by mid-2025, suggesting improved liquidity in the latest period.

Current Liabilities

Current liabilities initially declined from roughly $8.7 billion to approximately $6.5 billion by early 2021, reflecting a reduction in short-term obligations. However, after this point, the liabilities generally trended upward, reaching over $11 billion by mid-2025. The rising pattern of current liabilities in the latter years indicates an increase in short-term debt or payables, which may impact liquidity if not matched by asset growth.

Current Ratio

The current ratio showed considerable variability throughout the periods, starting below 1.0 at 0.68 and climbing above 1.0 during 2020 and early 2021, peaking around 1.2. This temporary improvement suggested better coverage of current liabilities by current assets during that phase. However, from late 2021 onwards, the ratio reverted to below 1.0, generally hovering between 0.64 and 0.89. The declining trend in the current ratio signals potential liquidity pressures, as current liabilities have grown disproportionately relative to current assets in recent quarters.

Overall Analysis

The data reveals a period of enhanced liquidity in 2020 followed by increasing financial pressure beginning in late 2021, characterized by growing current liabilities and a moderate decline in the current ratio. While current assets have shown some recovery towards mid-2025, the continuous rise in current liabilities suggests an increasing reliance on short-term obligations, which could pose a risk to short-term financial stability if the asset base does not sufficiently improve.

Liquidity Position and Quick Assets

The total quick assets exhibit notable volatility over the observed periods. Starting from approximately $4.02 billion, there is a decline in the early 2020 quarters, reaching a trough near $3.57 billion. Subsequently, quick assets increase, peaking around $7.56 billion by late 2021, suggesting a temporary strengthening of liquid resources. However, following this peak, there is a general downward trend with occasional fluctuations, with values stabilizing between $4.2 billion and $5.1 billion in more recent quarters. This pattern indicates fluctuations in highly liquid assets, which may reflect changing cash management strategies or operational needs.

Current Liabilities

Current liabilities follow a somewhat different pattern compared to quick assets. They started around $8.68 billion and showed a gradual decrease through 2020, bottoming near $6.5 billion in early 2021. After this decline, current liabilities generally trend upwards, reaching a high above $11.14 billion by mid-2025. This persistent increase in short-term obligations may point to an increased reliance on current liabilities to fund operations or investments, potentially impacting liquidity risk.

Quick Ratio Analysis

The quick ratio mirrors the interaction between quick assets and current liabilities, reflecting short-term liquidity health. Initially, the ratio is below 0.5, indicating that quick assets cover less than half of current liabilities. There is a marked improvement through mid-2020, with the ratio climbing to nearly 0.93, suggesting a period of enhanced liquidity and a stronger capacity to meet immediate obligations. Following this peak, a decline occurs, with the quick ratio generally oscillating between 0.4 and 0.6 through recent quarters. The ratio's downward trend toward the end of the timeline, dipping close to 0.4, indicates a relative weakening in the coverage of current liabilities by liquid assets, raising considerations about short-term solvency.

Overall Observations

The data reveals a cyclical yet somewhat concerning liquidity profile. The increase in current liabilities coupled with fluctuating quick assets has produced a variable quick ratio, which remains predominantly under 1, indicating that quick assets do not fully cover current liabilities at any point. This persistent state suggests the company relies on other forms of financing to cover short-term obligations and may need to monitor liquidity risk closely. Management decisions around cash reserves, receivables, and payables appear to be critical factors influencing these trends.

Total cash assets

The total cash assets demonstrate a fluctuating pattern over the observed periods. Starting at approximately $3.11 billion, the cash assets decreased in early 2020 to about $2.63 billion before rising sharply in the mid-2020 quarters, reaching a peak near $6.62 billion in the last quarter of 2021. Following this peak, the cash assets generally declined through 2022 and early 2023, stabilizing around the $3.3 to $3.9 billion range during 2023. The data shows a slight decrease again in early 2024 with some volatility towards mid-2024, ending with an increase to approximately $4.51 billion by the middle of 2025.

Current liabilities

Current liabilities exhibit a variable trend with an initial high value near $8.68 billion at the end of 2019, followed by a decline through 2020, reaching roughly $6.5 billion by the first quarter of 2021. Subsequently, liabilities increase steadily with some fluctuations and exceed $9 billion from late 2021 onwards. Notably, in 2023 and 2024, liabilities show a general upward trend, peaking at over $11.1 billion by mid-2025. This indicates growing short-term obligations over the medium term.

Cash ratio

The cash ratio, representing liquidity, starts at a moderate level of 0.36, dipping slightly in early 2020 before rising significantly in the second half of 2020 and peaking at 0.81 in late 2021. This peak suggests a period of relatively high liquidity. Following this, the ratio declines steadily through 2022 and early 2023, reaching lower levels around 0.35 to 0.42. In 2024 and into mid-2025, the cash ratio fluctuates between 0.29 and 0.41, indicating reduced liquidity relative to current liabilities compared to the peak period but remaining above the lowest points observed earlier in 2020.

Summary

Overall, the company’s total cash assets show volatility with a notable increase and subsequent decline pattern, peaking in late 2021. Current liabilities initially decreased during 2020 but have risen consistently since, surpassing previous levels by mid-2025. The cash ratio followed a similar trajectory, improving during 2020 and 2021 with a peak in liquidity but has since diminished, reflecting growing liabilities and relatively moderated cash reserves. This trend suggests that while the company managed liquidity well during the pandemic-induced uncertainty, recent periods show increased financial obligations and comparatively tighter liquidity conditions.