Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Anadarko Petroleum Corp., liquidity ratios
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.58 | 0.95 | 1.10 | 1.25 | 1.70 | |
| Quick ratio | 1.48 | 0.82 | 0.97 | 1.13 | 1.31 | |
| Cash ratio | 0.96 | 0.22 | 0.72 | 0.65 | 0.62 |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The liquidity position exhibited a consistent downward trend between 2012 and 2015, followed by a significant recovery in 2016. The overall pattern suggests a period of tightening short-term solvency that peaked in 2015 before a substantial restoration of liquid assets occurred in the final year of the period.
- Current Ratio
- A steady decline is observed from 1.70 in 2012 to a low of 0.95 in 2015. The dip below 1.0 in 2015 indicates a period where current liabilities exceeded current assets. However, a sharp reversal occurred in 2016, with the ratio rising to 1.58, signaling a return to a stronger liquidity cushion.
- Quick Ratio
- The quick ratio closely mirrors the trajectory of the current ratio, decreasing from 1.31 in 2012 to 0.82 in 2015. This downward movement suggests that the reduction in liquidity was not solely dependent on inventory levels. Similar to the current ratio, a strong recovery was recorded in 2016, reaching 1.48.
- Cash Ratio
- The cash ratio remained relatively stable and slightly increased between 2012 and 2014, moving from 0.62 to 0.72. A severe contraction occurred in 2015, with the ratio falling to 0.22, representing the lowest liquidity point across all measured metrics. This was followed by a substantial increase to 0.96 in 2016, the highest cash position relative to liabilities in the analyzed five-year period.
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Current Ratio
Anadarko Petroleum Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 5,266) | 3,982) | 11,221) | 7,108) | 6,795) | |
| Current liabilities | 3,328) | 4,181) | 10,234) | 5,703) | 3,994) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.58 | 0.95 | 1.10 | 1.25 | 1.70 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Current ratio = Current assets ÷ Current liabilities
= 5,266 ÷ 3,328 = 1.58
2 Click competitor name to see calculations.
The liquidity position of the organization exhibited significant volatility between 2012 and 2016, characterized by a sustained period of decline followed by a sharp recovery in the final year of the analyzed period.
- Current Ratio Trend
- A steady downward trajectory is observed from 2012 to 2015, with the current ratio decreasing from 1.70 to 0.95. The decline reached a critical point in 2015, where the ratio fell below 1.0, indicating that current liabilities exceeded current assets for the first time during this period.
- Asset and Liability Dynamics
- Between 2012 and 2014, both current assets and current liabilities grew substantially, peaking in 2014 at 11,221 million US$ and 10,234 million US$, respectively. Despite the increase in total assets, the current ratio compressed from 1.70 to 1.10, suggesting that liabilities were increasing at a faster relative pace than assets.
- Liquidity Contraction and Recovery
- A sharp contraction in current assets occurred in 2015, dropping to 3,982 million US$, which drove the current ratio to its lowest point of 0.95. However, a strong recovery was realized in 2016, with the current ratio rising to 1.58. This improvement was facilitated by a simultaneous increase in current assets to 5,266 million US$ and a reduction in current liabilities to 3,328 million US$, restoring a more robust liquidity cushion.
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Quick Ratio
Anadarko Petroleum Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 3,184) | 939) | 7,369) | 3,698) | 2,471) | |
| Accounts receivable, net of allowance, customers | 1,007) | 652) | 1,118) | 1,481) | 1,473) | |
| Accounts receivable, net of allowance, others | 721) | 1,817) | 1,409) | 1,241) | 1,274) | |
| Total quick assets | 4,912) | 3,408) | 9,896) | 6,420) | 5,218) | |
| Current liabilities | 3,328) | 4,181) | 10,234) | 5,703) | 3,994) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.48 | 0.82 | 0.97 | 1.13 | 1.31 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 4,912 ÷ 3,328 = 1.48
2 Click competitor name to see calculations.
An analysis of the quick ratio from 2012 to 2016 reveals a period of declining liquidity followed by a significant recovery. The ability to cover short-term obligations using the most liquid assets experienced a consistent downward trajectory for four consecutive years before rebounding in the final year of the analyzed period.
- Liquidity Deterioration (2012–2015)
- The quick ratio decreased steadily from 1.31 in 2012 to a low of 0.82 in 2015. Between 2012 and 2014, current liabilities grew at a faster rate than quick assets, eventually pushing the ratio below the 1.0 threshold by the end of 2014. This indicated a shift where quick assets were no longer sufficient to cover current liabilities independently.
- Balance Sheet Contraction (2014–2015)
- A substantial contraction in the scale of short-term financials occurred between 2014 and 2015. Total quick assets fell from 9,896 million USD to 3,408 million USD, while current liabilities decreased from 10,234 million USD to 4,181 million USD. Despite the reduction in liabilities, the sharper decline in liquid assets resulted in the period's lowest liquidity position of 0.82.
- Liquidity Recovery (2016)
- A sharp reversal occurred in 2016, with the quick ratio rising to 1.48, the highest level recorded in the five-year period. This improvement was driven by a simultaneous increase in total quick assets to 4,912 million USD and a further reduction in current liabilities to 3,328 million USD, effectively restoring and enhancing the immediate solvency position.
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Cash Ratio
Anadarko Petroleum Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 3,184) | 939) | 7,369) | 3,698) | 2,471) | |
| Total cash assets | 3,184) | 939) | 7,369) | 3,698) | 2,471) | |
| Current liabilities | 3,328) | 4,181) | 10,234) | 5,703) | 3,994) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.96 | 0.22 | 0.72 | 0.65 | 0.62 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 3,184 ÷ 3,328 = 0.96
2 Click competitor name to see calculations.
The company's liquidity position between 2012 and 2016 was characterized by significant volatility, marked by a substantial accumulation of assets and liabilities peaking in 2014, a sharp liquidity contraction in 2015, and a strong recovery in 2016.
- Cash Ratio Analysis
- The cash ratio exhibited a gradual improvement from 0.62 in 2012 to 0.72 in 2014, suggesting a steady increase in the ability to cover short-term obligations with cash. This trend was abruptly interrupted in 2015, when the ratio fell to 0.22, indicating a period of heightened liquidity risk. However, a rapid recovery occurred by the end of 2016, with the ratio reaching 0.96, the highest level recorded during the five-year period.
- Cash Asset Fluctuations
- Total cash assets grew consistently from 2,471 million US dollars in 2012 to a peak of 7,369 million US dollars in 2014. A severe decline followed in 2015, with cash assets dropping to 939 million US dollars. This represents a significant reduction in immediate liquidity before assets rebounded to 3,184 million US dollars in 2016.
- Current Liability Trends
- Current liabilities increased substantially from 3,994 million US dollars in 2012 to a high of 10,234 million US dollars in 2014. Following this peak, there was a marked reduction in short-term obligations, which fell to 4,181 million US dollars in 2015 and further decreased to 3,328 million US dollars by 2016. The combined effect of increasing cash assets and decreasing current liabilities in the final year contributed significantly to the overall improvement in the cash ratio.
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