Walmart Inc. (NASDAQ:WMT)

The liquidity position, as indicated by the assessed ratios, demonstrates a generally declining trend over the observed period. All three ratios – current, quick, and cash – exhibit decreases from 2021 to 2026, suggesting a potential weakening in the company’s ability to meet its short-term obligations using its most liquid assets.

Current Ratio

The current ratio decreased steadily from 0.97 in 2021 to 0.79 in 2026. While remaining below 1.0 for the majority of the period, the decline appears to be stabilizing between 2023 and 2026, fluctuating around 0.82-0.83 before the final decrease. A current ratio below 1.0 indicates that current liabilities exceed current assets.

Quick Ratio

The quick ratio, which excludes inventory from current assets, also shows a downward trend. It remained constant at 0.26 in 2021 and 2022, then decreased to 0.18 in 2023. The ratio stabilized at 0.20 for 2024, 2025, and 2026. This suggests a consistent inability to cover immediate liabilities with highly liquid assets, and a reliance on inventory liquidation to meet short-term obligations.

Cash Ratio

The cash ratio, the most conservative liquidity measure, experienced the most significant decline. Starting at 0.19 in 2021, it decreased to 0.09 in 2023, and has remained relatively stable at approximately 0.10-0.11 for the subsequent years. This indicates a diminishing capacity to cover immediate liabilities solely with cash and cash equivalents.

Overall, the consistent decline in all three liquidity ratios suggests a potential increase in liquidity risk over the analyzed timeframe. The stabilization of the quick and cash ratios in the later years may indicate a leveling off of this risk, but the ratios remain low, warranting continued monitoring.

The current ratio exhibits a consistent downward trend over the analyzed period. Initially at 0.97 in 2021, the ratio decreased to 0.79 by 2026. This indicates a progressively diminishing ability to cover short-term obligations with short-term assets.

Overall Trend

A clear declining pattern is observed in the current ratio throughout the six-year period. The ratio decreased from 0.97 in 2021 to 0.79 in 2026, representing a reduction of approximately 18.5%. This suggests a weakening liquidity position.

Year-over-Year Changes

The largest single-year decrease occurred between 2021 and 2022, with a drop from 0.97 to 0.93. A more substantial decline was then seen between 2022 and 2023, falling to 0.82. The rate of decline appeared to stabilize between 2023 and 2024, remaining at 0.83, before continuing its downward trajectory in subsequent years.

Relationship to Component Values

The decrease in the current ratio is attributable to a combination of factors. While current assets experienced some fluctuation, with a slight increase between 2023 and 2026, current liabilities consistently increased throughout the period. The growth in current liabilities outpaced any gains in current assets, contributing to the overall decline in the ratio.

The consistent reduction in the current ratio warrants further investigation into the underlying causes of the increasing current liabilities and the potential impact on the organization’s short-term financial health. Continued monitoring of this trend is recommended.

The quick ratio exhibits a generally low and relatively stable profile over the analyzed period. While fluctuating slightly, it remains consistently below 0.3, indicating a limited capacity to meet short-term obligations with highly liquid assets.

Overall Trend

The quick ratio remained at 0.26 for both 2021 and 2022. A decline to 0.18 was observed in 2023, followed by a modest recovery to 0.20 in 2024 and remaining at that level through 2026. This suggests a period of weakened liquidity followed by stabilization, but not significant improvement.

Quick Asset Movement

Total quick assets decreased from US$24,257 million in 2021 to US$16,558 million in 2023, contributing to the decline in the quick ratio. A subsequent increase is noted, reaching US$21,899 million by 2026, but this increase has not been sufficient to substantially improve the ratio.

Liability Impact

Current liabilities remained relatively stable between 2021 and 2024, fluctuating between US$87,379 million and US$96,584 million. However, a notable increase to US$107,469 million is observed in 2026. This increase in liabilities, coupled with the limited improvement in quick assets, explains the sustained low quick ratio.

The consistency of the quick ratio around 0.20 suggests a deliberate management of working capital, potentially prioritizing investment in less liquid, but potentially more profitable, assets. However, it also indicates a vulnerability to short-term liquidity shocks, particularly given the increasing trend in current liabilities towards the end of the period.

The cash ratio demonstrates a generally declining trend over the observed period, though with some fluctuation. Initial values indicate a relatively stable position, followed by a noticeable decrease and subsequent stabilization at a lower level. This suggests a shifting liquidity profile.

Overall Trend

The cash ratio experienced a decrease from 0.19 in 2021 to 0.09 in 2023. While there was a slight recovery to 0.11 in 2024, the ratio remained significantly below the initial level. Projections for 2025 and 2026 suggest continued stability around the 0.10 mark, indicating a sustained lower level of immediate liquidity.

Cash Asset Movement

Total cash assets decreased substantially from US$17,741 million in 2021 to US$8,625 million in 2023. A partial recovery was observed in 2024, reaching US$9,867 million, and this trend continued with US$9,037 million in 2025 and US$10,727 million in 2026. However, the asset levels remained below those recorded in the earlier years of the period.

Current Liabilities

Current liabilities exhibited a more consistent upward trend throughout the period. Starting at US$92,645 million in 2021, they increased to US$107,469 million by 2026. This consistent growth in short-term obligations, coupled with the fluctuations in cash assets, contributed to the observed decline in the cash ratio.

Ratio Interpretation

The cash ratio, measuring the ability to meet current obligations with only cash and cash equivalents, indicates a decreasing capacity to cover short-term liabilities with the most liquid assets. The decline from 0.19 to 0.09 suggests a growing reliance on other current assets to fulfill short-term obligations. The stabilization around 0.10 in later years indicates a consistent, albeit reduced, level of immediate liquidity.

The combination of decreasing cash assets and increasing current liabilities has resulted in a diminished cash ratio. Continued monitoring of these trends is recommended to assess potential impacts on short-term financial flexibility.