Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Allergan PLC, liquidity ratios
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.01 | 1.13 | 1.16 | 2.27 | 1.03 | |
| Quick ratio | 0.82 | 0.83 | 0.95 | 2.00 | 0.42 | |
| Cash ratio | 0.53 | 0.33 | 0.65 | 1.68 | 0.13 |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The liquidity position of the company exhibited significant volatility between 2015 and 2019, characterized by a sharp spike in all liquidity metrics in 2016 followed by a consistent multi-year contraction.
- Current Ratio
- The current ratio increased from 1.03 in 2015 to a peak of 2.27 in 2016, indicating a temporary period of high short-term solvency. A downward trend followed, with the ratio declining to 1.16 in 2017 and ending the period at 1.01 in 2019. This progression suggests a return to a lean liquidity profile where current assets only marginally cover current liabilities.
- Quick Ratio
- A mirrored pattern is observed in the quick ratio, which rose from 0.42 in 2015 to 2.00 in 2016 before retreating to 0.82 by 2019. The persistent divergence between the current ratio and the quick ratio suggests that a significant portion of the company's current assets is held in inventory, which is excluded from the quick ratio calculation.
- Cash Ratio
- The cash ratio demonstrated the most extreme fluctuation, rising from 0.13 in 2015 to 1.68 in 2016, which indicates a substantial temporary increase in cash and cash equivalents relative to short-term debt. This ratio declined sharply to 0.33 by 2018 before a modest recovery to 0.53 in 2019. The overall trend indicates a marked reduction in the company's most liquid assets compared to the peak observed in 2016.
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Current Ratio
Allergan PLC, current ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 11,126,700) | 6,475,400) | 11,376,700) | 17,857,900) | 8,615,400) | |
| Current liabilities | 11,070,700) | 5,727,900) | 9,848,100) | 7,874,700) | 8,328,300) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.01 | 1.13 | 1.16 | 2.27 | 1.03 | |
| 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: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Current ratio = Current assets ÷ Current liabilities
= 11,126,700 ÷ 11,070,700 = 1.01
2 Click competitor name to see calculations.
The liquidity position of the organization exhibited significant volatility between 2015 and 2019, characterized by a sharp expansion in current assets followed by a period of contraction and normalization. The current ratio peaked in 2016 before returning to a near-neutral state by the end of the five-year period.
- Current Assets Trends
- Current assets showed substantial fluctuation, rising from US$ 8.6 billion in 2015 to a peak of US$ 17.9 billion in 2016. A subsequent decline occurred over the following two years, reaching a low of US$ 6.5 billion in 2018, before rebounding to US$ 11.1 billion in 2019.
- Current Liabilities Trends
- Current liabilities remained relatively more stable than assets but demonstrated a general upward trajectory toward the end of the period. After a slight decrease to US$ 7.9 billion in 2016 and a dip to US$ 5.7 billion in 2018, liabilities increased sharply to US$ 11.1 billion by December 31, 2019.
- Current Ratio Analysis
- The current ratio increased from 1.03 in 2015 to 2.27 in 2016, indicating a period of high short-term liquidity. However, this ratio declined steadily thereafter, reaching 1.16 in 2017 and 1.13 in 2018, before ending at 1.01 in 2019. This downward trend indicates that the margin of safety for meeting short-term obligations has narrowed, returning to a level nearly identical to the 2015 baseline.
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Quick Ratio
Allergan PLC, quick ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 2,503,300) | 880,400) | 1,817,200) | 1,724,000) | 1,096,000) | |
| Marketable securities | 3,411,600) | 1,026,900) | 4,632,100) | 11,501,500) | 9,300) | |
| Accounts receivable, net | 3,192,300) | 2,868,100) | 2,899,000) | 2,531,000) | 2,401,600) | |
| Total quick assets | 9,107,200) | 4,775,400) | 9,348,300) | 15,756,500) | 3,506,900) | |
| Current liabilities | 11,070,700) | 5,727,900) | 9,848,100) | 7,874,700) | 8,328,300) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.82 | 0.83 | 0.95 | 2.00 | 0.42 | |
| 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: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 9,107,200 ÷ 11,070,700 = 0.82
2 Click competitor name to see calculations.
The liquidity profile exhibits significant volatility over the five-year period, characterized by a substantial peak in 2016 followed by a downward trend and subsequent stabilization at a lower level.
- Quick Ratio Volatility
- The quick ratio experienced a sharp increase from 0.42 in 2015 to 2.00 in 2016, indicating a temporary surge in immediate liquidity. Following this peak, the ratio declined to 0.95 in 2017 and trended slightly downward to 0.82 by 2019.
- Quick Assets Analysis
- Total quick assets peaked in 2016 at 15.7 billion USD, more than quadrupling the 2015 balance of 3.5 billion USD. This asset base contracted significantly to 4.7 billion USD by 2018 before rebounding to 9.1 billion USD in 2019.
- Current Liabilities Influence
- Current liabilities fluctuated throughout the period, starting at 8.3 billion USD in 2015 and reaching a peak of 11.0 billion USD in 2019. The expansion of liabilities in 2019 offset the increase in quick assets, maintaining the quick ratio at 0.82.
- Overall Liquidity Position
- With the exception of 2016, the quick ratio consistently remained below 1.0. This pattern indicates a persistent reliance on other current assets or external financing to meet short-term obligations, as the most liquid assets were insufficient to cover current liabilities in full for the majority of the analyzed period.
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Cash Ratio
Allergan PLC, cash ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 2,503,300) | 880,400) | 1,817,200) | 1,724,000) | 1,096,000) | |
| Marketable securities | 3,411,600) | 1,026,900) | 4,632,100) | 11,501,500) | 9,300) | |
| Total cash assets | 5,914,900) | 1,907,300) | 6,449,300) | 13,225,500) | 1,105,300) | |
| Current liabilities | 11,070,700) | 5,727,900) | 9,848,100) | 7,874,700) | 8,328,300) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.53 | 0.33 | 0.65 | 1.68 | 0.13 | |
| 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: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 5,914,900 ÷ 11,070,700 = 0.53
2 Click competitor name to see calculations.
The liquidity position of the entity exhibited significant volatility between 2015 and 2019, characterized by sharp fluctuations in both cash reserves and short-term obligations.
- Cash Asset Trends
- A substantial increase in cash assets occurred in 2016, peaking at US$ 13.2 billion from a 2015 base of US$ 1.1 billion. This peak was followed by a consistent decline through 2018, where assets dropped to US$ 1.9 billion, before recovering to US$ 5.9 billion in 2019.
- Current Liability Movements
- Current liabilities remained relatively stable between 2015 and 2016 before increasing to US$ 9.8 billion in 2017. A notable reduction was observed in 2018, bringing liabilities down to US$ 5.7 billion, followed by a sharp increase to a five-year peak of US$ 11.1 billion by the end of 2019.
- Cash Ratio Analysis
- The cash ratio reflects the volatility of the underlying balance sheet components. The ratio rose from 0.13 in 2015 to a peak of 1.68 in 2016, indicating a period where cash assets more than covered current liabilities. Subsequently, the ratio declined to 0.65 in 2017 and further to 0.33 in 2018. By 2019, the ratio improved to 0.53, although the concurrent surge in current liabilities mitigated the impact of the increased cash holdings.
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