Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Allergan Inc., liquidity ratios
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Current ratio | 4.41 | 4.28 | 4.07 | 4.24 | 2.61 | |
| Quick ratio | 3.78 | 3.64 | 3.40 | 3.47 | 2.22 | |
| Cash ratio | 3.19 | 2.93 | 2.70 | 2.71 | 1.79 |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
The liquidity position of the organization exhibited a significant strengthening between 2010 and 2014, characterized by a substantial increase across all primary liquidity metrics. A sharp upward shift occurred between 2010 and 2011, followed by a period of sustained high liquidity and gradual growth through the end of 2014.
- Current Ratio
- The current ratio rose from 2.61 in 2010 to 4.41 by 2014. Despite a marginal decline in 2012 to 4.07, the overall trajectory indicates a robust capacity to meet short-term obligations with current assets, maintaining a ratio that significantly exceeds standard liquidity benchmarks.
- Quick Ratio
- A similar growth pattern is observed in the quick ratio, which increased from 2.22 in 2010 to 3.78 in 2014. The narrow gap between the quick ratio and the current ratio suggests that inventory represents a relatively small portion of total current assets, indicating that liquidity is not heavily dependent on inventory liquidation.
- Cash Ratio
- The cash ratio demonstrated consistent growth, ascending from 1.79 in 2010 to 3.19 in 2014. This trend confirms a substantial accumulation of cash and cash equivalents, ensuring that current liabilities can be covered more than three times over by the most liquid assets available.
The overall analysis reveals an extremely conservative liquidity profile. The simultaneous increase in the current, quick, and cash ratios points toward a substantial surplus of liquid assets relative to short-term liabilities. While this minimizes solvency risk, the high levels of cash-on-hand may suggest an opportunity for more aggressive capital allocation or investment.
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Current Ratio
Allergan Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 6,871,200) | 5,319,700) | 4,458,800) | 4,048,300) | 3,993,700) | |
| Current liabilities | 1,557,300) | 1,244,300) | 1,095,200) | 955,000) | 1,528,400) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 4.41 | 4.28 | 4.07 | 4.24 | 2.61 | |
| 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. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
1 2014 Calculation
Current ratio = Current assets ÷ Current liabilities
= 6,871,200 ÷ 1,557,300 = 4.41
2 Click competitor name to see calculations.
The analysis of the liquidity position between 2010 and 2014 reveals a significant strengthening of the organization's ability to cover its short-term obligations. A consistent growth trajectory in current assets is contrasted with more volatile movements in current liabilities, resulting in a substantially improved liquidity profile over the five-year period.
- Current Assets Trend
- Current assets exhibited uninterrupted growth, increasing from 3,993,700 thousand US$ in 2010 to 6,871,200 thousand US$ by 2014. The most pronounced acceleration occurred between 2013 and 2014, where assets increased by approximately 29% in a single fiscal year.
- Current Liabilities Trend
- Current liabilities experienced a notable reduction in 2011, dropping from 1,528,400 thousand US$ to 955,000 thousand US$. Following this decline, liabilities entered a period of steady annual increase, returning to 1,557,300 thousand US$ by the end of 2014.
- Current Ratio Performance
- The current ratio improved sharply from 2.61 in 2010 to 4.24 in 2011, primarily driven by the reduction in liabilities alongside asset growth. From 2012 through 2014, the ratio remained consistently high, concluding the period at 4.41. This indicates a strong liquidity cushion, as current assets exceeded current liabilities by a factor of more than four by the end of the observed period.
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Quick Ratio
Allergan Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and equivalents | 4,911,400) | 3,046,100) | 2,701,800) | 2,406,100) | 1,991,200) | |
| Short-term investments | 55,000) | 603,000) | 260,600) | 179,900) | 749,100) | |
| Trade receivables, net | 914,500) | 883,300) | 764,200) | 730,600) | 647,300) | |
| Total quick assets | 5,880,900) | 4,532,400) | 3,726,600) | 3,316,600) | 3,387,600) | |
| Current liabilities | 1,557,300) | 1,244,300) | 1,095,200) | 955,000) | 1,528,400) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 3.78 | 3.64 | 3.40 | 3.47 | 2.22 | |
| 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. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
1 2014 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 5,880,900 ÷ 1,557,300 = 3.78
2 Click competitor name to see calculations.
An analysis of the liquidity position from 2010 to 2014 indicates a significant enhancement in the capacity to cover short-term obligations using the most liquid assets. The overall trend reflects a robust increase in liquidity buffers over the five-year period.
- Total Quick Assets
- A consistent upward trajectory is observed in total quick assets, which increased from 3,387,600 thousand US$ in 2010 to 5,880,900 thousand US$ by the end of 2014. This steady accumulation of liquid assets suggests an improving ability to meet immediate financial commitments without relying on the sale of inventory.
- Current Liabilities
- Current liabilities exhibited a period of volatility, marked by a sharp decrease from 1,528,400 thousand US$ in 2010 to 955,000 thousand US$ in 2011. Following this contraction, short-term obligations rose steadily each year, returning to 1,557,300 thousand US$ by 2014, which is approximately level with the 2010 starting point.
- Quick Ratio Interpretation
- The quick ratio rose sharply from 2.22 in 2010 to 3.47 in 2011, a change driven by the simultaneous growth of liquid assets and the reduction of current liabilities. The ratio remained strong and continued to trend upward, ending the period at 3.78 in 2014. This trajectory demonstrates that the growth in quick assets significantly outpaced the growth in current liabilities, resulting in a high degree of liquidity and a decreased risk of short-term insolvency.
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Cash Ratio
Allergan Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and equivalents | 4,911,400) | 3,046,100) | 2,701,800) | 2,406,100) | 1,991,200) | |
| Short-term investments | 55,000) | 603,000) | 260,600) | 179,900) | 749,100) | |
| Total cash assets | 4,966,400) | 3,649,100) | 2,962,400) | 2,586,000) | 2,740,300) | |
| Current liabilities | 1,557,300) | 1,244,300) | 1,095,200) | 955,000) | 1,528,400) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 3.19 | 2.93 | 2.70 | 2.71 | 1.79 | |
| 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. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
1 2014 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 4,966,400 ÷ 1,557,300 = 3.19
2 Click competitor name to see calculations.
The liquidity position of the entity demonstrated a consistent and significant strengthening between 2010 and 2014, characterized by a substantial increase in the cash ratio. This upward trajectory indicates an enhanced ability to meet short-term obligations using only the most liquid assets available.
- Cash Asset Accumulation
- Total cash assets exhibited a strong growth pattern, rising from 2,740,300 thousand USD in 2010 to 4,966,400 thousand USD by 2014. Although a slight contraction occurred in 2011, the subsequent three years saw accelerated growth, culminating in a peak value at the end of the period.
- Current Liabilities Trend
- Current liabilities experienced volatility, decreasing sharply from 1,528,400 thousand USD in 2010 to 955,000 thousand USD in 2011. Following this decline, liabilities grew steadily each year, returning to 1,557,300 thousand USD by 2014, a level comparable to the 2010 baseline.
- Cash Ratio Evolution
- The cash ratio improved markedly from 1.79 in 2010 to 3.19 in 2014. A significant leap was observed between 2010 and 2011, where the ratio rose to 2.71, primarily driven by the simultaneous increase in cash and reduction in current liabilities. The ratio continued to climb steadily thereafter, ending the period at its highest point.
- Liquidity Interpretation
- The progression of the cash ratio suggests an increasingly conservative liquidity strategy. By 2014, the entity possessed more than three times the amount of cash required to cover its immediate liabilities, representing a high margin of safety and minimal liquidity risk.
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