Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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- Common-Size Income Statement
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Liquidity Ratios (Summary)
Vertex Pharmaceuticals Inc., liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2024-12-31), 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).
- Current Ratio
- The current ratio showed an upward trend from 4.33 in 2020 to a peak of 4.83 in 2022, indicating improving short-term liquidity during this period. However, it declined significantly thereafter, dropping to 3.99 in 2023 and further to 2.69 in 2024, suggesting a reduction in the company's ability to cover current liabilities with current assets by the end of the period.
- Quick Ratio
- The quick ratio remained relatively stable, increasing slightly from 4.02 in 2020 to 4.46 in 2022. This reflects a strong liquidity position excluding inventories during these years. Similar to the current ratio, this measure then decreased in the subsequent years to 3.60 in 2023 and markedly to 2.17 in 2024, pointing to a declining cushion of liquid assets available to meet short-term obligations.
- Cash Ratio
- The cash ratio followed a similar pattern, beginning at 3.55 in 2020, experiencing a minor dip to 3.51 in 2021, then rising to 3.93 in 2022. This indicates a robust level of cash and cash equivalents relative to current liabilities initially. The ratio then decreased to 3.16 in 2023 and more sharply to 1.72 in 2024, reflecting a significant reduction in the company's most liquid resources over the final two years.
- Overall Trend and Insights
- Over the five-year period, liquidity ratios initially improved, reaching highest levels around 2022, suggesting strong financial stability and liquidity management. From 2023 onward, all liquidity ratios experienced a marked decline, with the most pronounced decrease observed in 2024. This downward trend may indicate increased current liabilities, reduced current assets, or a change in asset composition. Despite the decline, the ratios remained above 1.0, implying that the company maintained a fundamental level of liquidity adequate to meet short-term obligations, although the decreasing trend warrants attention for future liquidity risks.
Current Ratio
Vertex Pharmaceuticals Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Current Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Current Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Current assets
- The current assets demonstrated an initial upward trend from 8,133,379 thousand USD at the end of 2020 to a peak of 14,144,200 thousand USD at the end of 2023. This growth indicates an increase in liquid and short-term assets over the four-year period. However, there was a notable decline in 2024, dropping to 9,596,400 thousand USD, which reflects a significant reduction compared to the previous year.
- Current liabilities
- Current liabilities showed a consistent increase throughout the period, rising from 1,877,533 thousand USD in 2020 to 3,564,600 thousand USD in 2024. This steady growth signifies a rising obligation on the company’s short-term debts or payables, increasing almost twofold over five years.
- Current ratio
- The current ratio, which measures the company’s ability to cover its short-term liabilities with short-term assets, initially improved from 4.33 in 2020 to 4.83 in 2022, suggesting a strengthening liquidity position. However, it then declined in the following years, falling to 3.99 in 2023 and further down to 2.69 in 2024. Despite this decrease, the ratio remains above 1, indicating that current assets still exceed current liabilities but with reducing coverage.
Quick Ratio
Vertex Pharmaceuticals Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | ||||||
| Marketable securities | ||||||
| Accounts receivable, net | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Quick Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Quick Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total Quick Assets
- The total quick assets demonstrate a fluctuating trend over the five-year period. Starting at approximately 7.54 billion US dollars in 2020, these assets increased steadily, reaching a peak of around 12.22 billion in 2022. This upward trajectory continued slightly into 2023, with total quick assets around 12.78 billion. However, in 2024, there is a notable decline to approximately 7.73 billion, indicating a significant reduction in liquid assets compared to the previous two years.
- Current Liabilities
- Current liabilities have shown a continuous increase over the period. Beginning at roughly 1.88 billion US dollars in 2020, liabilities rose each year, reaching about 2.14 billion in 2021, 2.74 billion in 2022, and 3.55 billion in 2023. The growth trend persists into 2024, with liabilities recorded at approximately 3.56 billion. This steady increase suggests rising short-term obligations or expenses over the analyzed timeframe.
- Quick Ratio
- The quick ratio, which measures the company’s ability to meet short-term liabilities with its most liquid assets, reflects a declining trend in the latter years. It remained relatively stable around 4.02 to 4.04 between 2020 and 2021, then increased somewhat to 4.46 in 2022, indicating strong liquidity. From 2022 onwards, however, the ratio decreased notably to 3.6 in 2023 and further dropped to 2.17 in 2024. This decline corresponds with the sharp reduction in total quick assets in 2024 against steadily increasing current liabilities, suggesting weakening short-term financial strength.
- Summary
- Overall, while the company exhibited growth in liquid assets and maintained strong liquidity ratios through 2022, 2023 and especially 2024 show signs of deteriorating liquidity conditions. The continuous rise in current liabilities combined with falling total quick assets has exerted downward pressure on the quick ratio. The material decrease in quick assets and the rapid decline in the quick ratio in 2024 could indicate potential liquidity management challenges moving forward.
Cash Ratio
Vertex Pharmaceuticals Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | ||||||
| Marketable securities | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Cash Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Cash Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total Cash Assets
- The total cash assets exhibit a fluctuating trend over the five-year period. There is a noticeable increase from approximately 6.66 billion US dollars at the end of 2020 to around 11.22 billion US dollars by the end of 2023. However, in 2024, the cash assets decline significantly to approximately 6.12 billion US dollars, indicating a sharp reduction in the company's liquidity position compared to the previous year.
- Current Liabilities
- Current liabilities show a consistent upward trend throughout the analyzed period. Starting from approximately 1.88 billion US dollars at the end of 2020, the liabilities increase steadily each year until reaching about 3.56 billion US dollars in 2024. This trend suggests that the company’s short-term obligations have nearly doubled over five years, potentially reflecting increased operational or financial leverage.
- Cash Ratio
- The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, remained relatively strong and stable between 2020 and 2022, with values above 3.5. The ratio peaked near 3.93 in 2022, signifying robust liquidity. In 2023, it declined to 3.16 and dropped further to 1.72 in 2024. This sharp decrease indicates a reduced capacity to cover liabilities with cash assets, likely influenced by the substantial decline in cash assets and the steady rise in current liabilities during 2024.
- Overall Analysis
- Over the five-year span, the company initially demonstrated increasing liquidity as evidenced by rising cash assets and a high cash ratio. However, the last recorded year signals a concerning shift. While current liabilities continued their upward trajectory, cash assets decreased markedly, resulting in a substantially weakened cash ratio. This combination suggests heightened liquidity risk and potential challenges in meeting short-term obligations purely through cash reserves moving forward. It may warrant further investigation into the causes of the cash depletion and an assessment of the company’s broader working capital management strategies.