Warner Bros. Discovery Inc. (NASDAQ:WBD)

Current Ratio

The current ratio exhibited notable volatility throughout the observed periods. It started at 1.69 in the first quarter of 2017, reached a significant peak of 5.87 by the third quarter of 2017, and remained elevated through the end of that year. Following this spike, the ratio decreased sharply and stabilized around the range of 1.0 to 1.9 from 2018 through the first quarter of 2022. Towards the last two quarters available, a steep decline occurred, dropping the ratio below 1, reaching 0.86 by the third quarter of 2022. This downward trend in the latter periods suggests a reduction in current assets relative to current liabilities, potentially indicating emerging liquidity pressures.

Quick Ratio

The quick ratio mirrors the volatility observed in the current ratio, with an initial surge from 1.19 in early 2017 to a peak of 5.35 in the third quarter of 2017. Post-2017, it demonstrated a declining and more stable pattern, generally remaining between 0.8 and 1.8 for most quarters until mid-2022. A sharp decrease is evident in the last two recorded periods, where the quick ratio fell below 1 to 0.62 by the third quarter of 2022. This decline indicates a decreasing buffer of liquid assets excluding inventory, which could be a concern for immediate solvency.

Cash Ratio

The cash ratio also showed a pronounced peak in the third quarter of 2017 at 4.33, followed by a rapid decrease and relative stabilization at lower levels. From 2018 through early 2022, it gradually increased from approximately 0.14 to above 1.1, indicating an improving liquidity position with respect to cash and cash equivalents relative to current liabilities. However, in the latest two quarters, the cash ratio sharply dropped to around 0.17, signaling a significant contraction in cash reserves against short-term obligations.

Overall Analysis

Collectively, the liquidity ratios illustrate a distinct pattern of an extraordinary rise in liquidity during 2017, possibly due to an unusual event or balance sheet adjustment, followed by a gradual normalization. Throughout 2018 to early 2022, liquidity measured by these ratios was generally adequate, with ratios mostly above 1 indicating comfortable short-term financial health. The most recent data, however, highlight a concerning plunge in all three liquidity metrics below critical thresholds, suggesting a potential liquidity strain that may warrant further attention to ensure ongoing operational stability.

The analysis of the quarterly financial data reveals distinct trends in the liquidity position over the observed periods.

Current Assets

Current assets demonstrated substantial variability. Initial values in early 2017 were around 2,500 to 2,700 million USD, with an abrupt increase recorded in the third quarter of 2017, peaking near 9,500 million USD, followed by a slight plateau until the end of 2017. During 2018 and 2019, current assets maintained relatively stable levels fluctuating between approximately 3,900 and 5,200 million USD. Beginning in 2020, a gradual upward trend became evident, with current assets increasing progressively each quarter, reaching a significant peak of nearly 15,500 million USD in the second quarter of 2022 before declining to around 12,700 million USD by the third quarter of 2022.

Current Liabilities

Current liabilities showed a growth trend over time. Starting near 1,500 million USD in early 2017, they gradually increased with fluctuations, peaking notably at around 4,000 million USD late in 2018. A moderate decline occurred through 2019 to mid-2020, descending to values below 3,000 million USD. However, from the third quarter of 2020 onwards, current liabilities resumed increasing, culminating sharply at over 14,400 million USD by the second quarter of 2022, and slightly rising further by the third quarter of 2022.

Current Ratio

The current ratio exhibited significant volatility and shifts. Early 2017 values ranged between 1.69 and 1.89, followed by an exceptional surge in the third quarter of 2017 to nearly 5.9, indicating a temporary large increase in liquidity relative to liabilities. This ratio diminished but remained above 1.0 throughout 2018 and 2019, fluctuating primarily between 1.01 and 1.61, demonstrating moderate liquidity. Starting in 2020, the current ratio increased steadily, reaching a high of 2.10 by the second quarter of 2022, reflective of an improving liquidity position, before dropping sharply in the last two quarters to below 1.0 (0.86) by the third quarter of 2022, indicating a potential liquidity concern as current liabilities surpassed current assets in those periods.

Overall, the data illustrates periods of enhanced liquidity accompanied by sudden increases in both current assets and liabilities, particularly in 2017 and 2022. The sharp rise and subsequent decline in the current ratio in 2022 suggest fluctuations in working capital management or possible balance sheet restructuring. This volatility warrants further investigation into underlying operational or financing activities impacting short-term assets and liabilities.

Total quick assets

The total quick assets demonstrated significant variability over the periods analyzed. Beginning at $1,827 million in March 2017, they rose sharply to peaks above $9,000 million in late 2017 and mid-2022, indicating notable increases in highly liquid assets during these times. After reaching $9,147 million in December 2017, values declined to a range between $3,000 million and $4,600 million throughout 2018 and 2019. A gradual upward trend resumed in 2020 and 2021, peaking again at $6,351 million by December 2021 before surging to $9,624 million in June 2022, followed by a slight decrease to $9,091 million in September 2022. These fluctuations suggest periods of asset accumulation and liquidation or reclassification affecting quick assets.

Current liabilities

Current liabilities increased consistently over the period, starting at $1,534 million in March 2017. There was a moderate rise through 2017 and 2018, reaching nearly $4,000 million by December 2018. A decrease occurred in the first half of 2020, bottoming around $2,500 million, then a gradual rise resumed into 2021 with values stabilizing around $3,000 to $3,500 million. A sharp and notable spike is observed in June and September 2022, where current liabilities escalated dramatically to approximately $14,400 million and $14,700 million respectively, representing a nearly fourfold increase compared to previous periods. This sharp increase may indicate substantial short-term obligations or reclassification of certain liabilities.

Quick ratio

The quick ratio exhibited considerable fluctuations, reflecting changes in liquidity positions relative to current liabilities. Initially above 1.0, the ratio peaked sharply at 5.35 in September 2017 and remained high at 4.89 into December 2017, corresponding to the earlier peak in quick assets relative to liabilities. Subsequently, the ratio declined below 1.0 during 2018 (lowest at 0.81 in September 2018), signaling relatively weaker liquidity. From 2019 through 2021, the ratio improved steadily, staying above 1.0 and reaching up to 1.85 by March 2022, indicating healthier short-term liquidity. However, a pronounced decline occurred in mid-2022, dropping to 0.67 in June and 0.62 in September, driven by the substantial rise in current liabilities outpacing quick assets, suggesting a potential liquidity concern during the most recent quarters.

Overall trends and insights

The financial data reveals periods of strong liquidity, notably in late 2017 and early 2022, characterized by elevated quick assets and high quick ratios. However, the most recent data points in 2022 manifest a sharp increase in current liabilities disproportionately larger than quick asset growth, resulting in a quick ratio well below 1.0. This suggests potential liquidity pressure and increased short-term financial obligations that may require close monitoring. The fluctuations in quick assets and liabilities could also indicate changes in working capital management strategies, asset sales or acquisitions, or shifting operational conditions impacting liquid asset levels and liabilities. Continuous evaluation of short-term liquidity and liability management is advised given the recent movements.

Total Cash Assets

Over the examined periods, total cash assets displayed significant fluctuations. Initially, cash assets were relatively low, with a minor peak observed on June 30, 2017. A substantial spike was noted on September and December 31, 2017, reaching values well above typical levels in earlier quarters. Following this peak, cash assets decreased considerably during 2018 and early 2019, maintaining lower values relative to the 2017 highs. From mid-2019 onward, a gradual upward trend emerged, with cash assets increasing steadily through 2021 and reaching higher levels than the earlier years. However, a sharp decline occurred in mid-2022, bringing cash assets down considerably by the end of the period under review.

Current Liabilities

Current liabilities generally showed an upward trajectory over the years. Beginning with moderate levels in 2017, liabilities increased steadily through 2018 and 2019. This trend accelerated notably in 2022, where liabilities surged dramatically, surpassing previous periods by a wide margin. The most pronounced escalation is seen from March 31, 2022, to June 30, 2022, indicating a significant rise in short-term financial obligations within a short interval.

Cash Ratio

The cash ratio exhibited pronounced variability corresponding to changes in cash assets and liabilities. The ratio was very high in late 2017, largely due to the temporary peak in cash assets, reaching values above 3.5. This was followed by a sharp decline throughout 2018 and 2019, with cash ratios stabilizing at lower levels below 0.5 in many quarters. From mid-2020 through 2021, there was a marked improvement in liquidity, as indicated by rising cash ratios that approached or exceeded 1.0 in several quarters, reflecting stronger coverage of current liabilities by cash assets. However, the ratio dropped precipitously in 2022, aligning with the sudden decrease in cash assets and sharp increase in current liabilities, suggesting a notable weakening in short-term liquidity during that period.