Air Products & Chemicals Inc. (NYSE:APD)

Current Ratio

The current ratio shows a generally increasing trend from 0.8 in 2015 to 3.59 in 2020. This indicates a notable improvement in the company's ability to cover its short-term liabilities with its short-term assets. The ratio rose sharply between 2015 and 2017, reaching 2.36, and although it slightly dipped in 2018 to 2.17, it resumed its upward trajectory in subsequent years, culminating at the highest level in 2020. This upward trend suggests enhanced liquidity and potentially greater financial stability over the period analyzed.

Quick Ratio

The quick ratio also exhibits an increasing pattern over the six years. Starting at 0.44 in 2015, it nearly doubled by 2016 to 0.9 and then surged to 1.95 in 2017. Despite a minor decrease in 2018 to 1.79, the ratio climbed again reaching 3.16 by 2020. This improvement reflects stronger immediate liquidity, implying the company has progressively increased its liquid assets relative to current liabilities, excluding inventory.

Cash Ratio

The cash ratio experienced a more pronounced rise compared to the other liquidity ratios. Initially very low at 0.06 in 2015, it increased substantially to 0.46 in 2016 and further surged to 1.48 in 2017. Though there was a small decline to 1.27 in 2018, the ratio remained above 1 in subsequent years, ending at 2.63 in 2020. This indicates a strengthening position in cash and cash equivalents, suggesting the company's enhanced capability to meet short-term obligations solely through the most liquid assets.

The data reveals significant developments in liquidity and short-term financial health over the six-year period ending September 30, 2020.

Current Assets

Current assets show a notable upward trend, increasing from US$2,910,800 thousand in 2015 to US$8,684,900 thousand by 2020. Despite a slight dip in 2018 and 2019 following a peak in 2017, the overall trajectory is strongly positive, indicating improved asset availability to cover short-term obligations.

Current Liabilities

Current liabilities steadily declined from US$3,648,100 thousand in 2015 to a low of US$1,820,900 thousand in 2019, before rising to US$2,416,700 thousand in 2020. The general decreasing pattern until 2019 suggests effective management or reduction of short-term debts, although the rise in 2020 calls for attention to potential shifts in obligations.

Current Ratio

The current ratio increased markedly over the period, starting at a low 0.8 in 2015 and reaching 3.59 by 2020. This substantial improvement signals strengthened liquidity, with the company progressively increasing its cushion of current assets relative to current liabilities. The ratio above 3 in 2020 reflects a conservative liquidity position that may suggest a robust buffer to meet immediate financial commitments.

Collectively, the data indicates a strategic enhancement in liquidity, with amplified current assets and reduced current liabilities driving a significant improvement in the current ratio. The spike in current liabilities in 2020 coupled with continued asset growth suggests the company maintains strong short-term financial flexibility despite some recent increases in obligations.

The analysis of the financial indicators over the six-year period reveals distinct trends in the liquidity position of the entity. Quick assets, measured in thousands of US dollars, initially increased significantly from 1,612,600 in 2015 to a peak of 4,851,600 by 2017, demonstrating enhanced liquid resources available to cover immediate liabilities. Although there was a moderate decline in 2018 and 2019, the quick assets surged sharply to 7,632,700 in 2020, reaching the highest value in the observed timeframe.

Current liabilities showed a consistent downward trend from 3,648,100 in 2015 to 1,820,900 in 2019, indicating a reduction in short-term obligations. However, an uptick occurred in 2020, with current liabilities rising to 2,416,700, suggesting an increase in short-term financial commitments during the latest period.

The quick ratio, which reflects the company's ability to meet short-term liabilities without relying on inventory sales, improved markedly over the analyzed years. Starting at a low 0.44 in 2015, the ratio more than doubled by 2016 to 0.9, almost doubling again in 2017 to 1.95. Though it dipped slightly in 2018 to 1.79, it recovered and increased to 2.02 in 2019, followed by a substantial rise to 3.16 in 2020. This trend suggests a strengthening liquidity position and greater capacity for immediate debt coverage over time.

Cash Assets Trend

The total cash assets exhibit a strong upward trajectory over the period, increasing from 206,400 thousand US dollars in 2015 to 6,357,900 thousand US dollars by 2020. Notably, there is a significant jump in 2016 followed by fluctuations, but the overall trend remains sharply positive, indicating enhanced liquidity and cash reserves.

Current Liabilities Trend

Current liabilities demonstrate a general decline from 3,648,100 thousand US dollars in 2015 to 1,820,900 thousand US dollars in 2019, signifying a reduction in short-term obligations during this period. However, in 2020, there is a rebound to 2,416,700 thousand US dollars, marking an increase in liabilities relative to the previous year.

Cash Ratio Analysis

The cash ratio, measuring the ability to cover current liabilities with cash and cash equivalents, shows a substantial improvement over the six years. Beginning at a low 0.06 in 2015, the ratio climbs steadily, surpassing parity from 2017 onward and reaching 2.63 in 2020. This suggests that the company has significantly strengthened its liquidity position, with cash assets increasingly sufficient to cover current liabilities, even more than double in the most recent year.

Overall Insights

The financial data reveals a marked enhancement in liquidity management, driven by large increases in cash holdings alongside a general reduction of current liabilities until a slight recovery in 2020. The company’s ability to meet short-term obligations with liquid assets has improved materially, indicating a more conservative or cash-rich financial posture in recent years. The spike in current liabilities in 2020, coupled with an even greater increase in cash, suggests prudent liquidity buffer management amidst potentially volatile conditions.