Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Apache Corp., liquidity ratios
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Current ratio | 2.04 | 1.75 | 1.35 | 0.90 | 0.97 | |
| Quick ratio | 1.48 | 0.76 | 1.03 | 0.59 | 0.68 | |
| Cash ratio | 0.80 | 0.21 | 0.41 | 0.03 | 0.06 |
Based on: 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), 10-K (reporting date: 2011-12-31).
The financial ratios over the five-year period exhibit varying trends indicating changes in liquidity and short-term financial health.
- Current Ratio
- The current ratio shows a consistent upward trend from 0.97 at the end of 2011 to 2.04 by the end of 2015. This improvement suggests that the company's ability to cover short-term liabilities with current assets strengthened significantly over the period, moving from a level just below 1.0 to more than double that by the final year. Such an increase typically reflects enhanced liquidity and potentially a more conservative working capital management strategy.
- Quick Ratio
- The quick ratio presents more variability but also demonstrates an overall increasing tendency. It decreased slightly from 0.68 in 2011 to 0.59 in 2012, then rose sharply to 1.03 in 2013, followed by a decline to 0.76 in 2014, and a strong recovery to 1.48 in 2015. This pattern indicates periods of fluctuating liquid asset management when excluding inventory, with a pronounced improvement toward the end of the period. The 2015 ratio above 1.0 signifies that the company had ample liquid assets to meet immediate liabilities without relying on inventory sales.
- Cash Ratio
- The cash ratio also increased notably from very low levels, starting at 0.06 in 2011, dipping further to 0.03 in 2012, and then rising significantly to 0.41 in 2013. After a slight decline to 0.21 in 2014, it increased sharply again to 0.80 in 2015. This ratio’s improvement reflects better cash and cash equivalents positions relative to current liabilities, thus indicating an enhanced capacity for immediate payment obligations. Despite starting from very low cash coverage, the upward trend suggests strengthening cash management and liquidity buffers over the period.
In summary, the company demonstrated a progressive strengthening in liquidity across multiple measures throughout the period from 2011 to 2015. While some fluctuations occurred, particularly with the quick and cash ratios, the overall trend clearly points to improved short-term financial stability and a more secure position in terms of meeting current obligations.
Current Ratio
Apache Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 3,752) | 6,415) | 6,366) | 4,962) | 4,803) | |
| Current liabilities | 1,841) | 3,664) | 4,700) | 5,536) | 4,963) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 2.04 | 1.75 | 1.35 | 0.90 | 0.97 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Current ratio = Current assets ÷ Current liabilities
= 3,752 ÷ 1,841 = 2.04
2 Click competitor name to see calculations.
The analysis of the financial data reveals notable trends in the liquidity position of the company over the five-year period ending December 31, 2015.
- Current Assets
- Current assets increased from 4803 million USD in 2011 to a peak of 6415 million USD in 2014, indicating an overall growth in short-term resources available to the company. However, there is a significant decline in 2015 to 3752 million USD, suggesting a possible reduction in liquid assets or receivables at the end of that year.
- Current Liabilities
- Current liabilities exhibited a downward trend throughout the same period, decreasing from 4963 million USD in 2011 to 1841 million USD in 2015. This steady reduction implies a decreasing short-term debt burden or obligations, which could improve the company's short-term solvency position.
- Current Ratio
- The current ratio shows a steady and marked improvement from 0.97 in 2011 to 2.04 in 2015. Initially, the ratio was below 1, indicating potential liquidity concerns. The consistent increase each year demonstrates enhanced ability to cover short-term liabilities with current assets. The ratio's rise above the generally accepted benchmark of 1 signifies improved financial stability and liquidity over the period.
Overall, the company's liquidity metrics indicate strengthening short-term financial health, particularly due to declining current liabilities and a rising current ratio despite the drop in current assets in the final year. This pattern suggests effective management of obligations and resources, enhancing the capability to meet short-term demands.
Quick Ratio
Apache Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 1,467) | 769) | 1,906) | 160) | 295) | |
| Receivables, net of allowance | 1,253) | 2,024) | 2,952) | 3,086) | 3,079) | |
| Total quick assets | 2,720) | 2,793) | 4,858) | 3,246) | 3,374) | |
| Current liabilities | 1,841) | 3,664) | 4,700) | 5,536) | 4,963) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.48 | 0.76 | 1.03 | 0.59 | 0.68 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 2,720 ÷ 1,841 = 1.48
2 Click competitor name to see calculations.
- Total Quick Assets
- The total quick assets exhibited significant fluctuations over the five-year period. Starting at 3,374 million US dollars, the value decreased slightly in 2012 to 3,246 million. In 2013, there was a marked increase, with total quick assets reaching 4,858 million. Subsequently, the figure declined again in 2014 and 2015 to 2,793 million and 2,720 million respectively, indicating a downward trend in liquid assets towards the end of the period.
- Current Liabilities
- Current liabilities showed a consistent and substantial decrease throughout the period. Initially recorded at 4,963 million US dollars in 2011, liabilities increased marginally to 5,536 million in 2012. From 2013 onwards, a steady reduction trend was observed, with liabilities falling to 4,700 million in 2013, 3,664 million in 2014, and reaching the lowest point of 1,841 million in 2015. This downward movement suggests an improving short-term debt position.
- Quick Ratio
- The quick ratio moved in alignment with changes in quick assets and current liabilities, reflecting liquidity position shifts. It began below 1 at 0.68 in 2011 and declined further to 0.59 in 2012, indicating a weaker ability to cover short-term liabilities with liquid assets during this time. There was a significant improvement in 2013, with the ratio rising above 1 to 1.03. However, it dipped again to 0.76 in 2014 before increasing sharply to 1.48 in 2015. The final value of 1.48 implies a strong liquidity position at the end of the analyzed period.
Cash Ratio
Apache Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 1,467) | 769) | 1,906) | 160) | 295) | |
| Total cash assets | 1,467) | 769) | 1,906) | 160) | 295) | |
| Current liabilities | 1,841) | 3,664) | 4,700) | 5,536) | 4,963) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.80 | 0.21 | 0.41 | 0.03 | 0.06 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 1,467 ÷ 1,841 = 0.80
2 Click competitor name to see calculations.
The financial data reveals important changes in key liquidity and liability metrics over the five-year period ending December 31, 2015.
- Total Cash Assets
- The total cash assets show a considerable fluctuation across the years. Beginning at $295 million in 2011, cash assets significantly decreased to $160 million in 2012. The following year, a substantial increase occurred, with cash assets reaching $1,906 million. This was followed by a decrease to $769 million in 2014, and subsequently rising again to $1,467 million in 2015. This pattern indicates volatility in cash holdings, with a notable surge in 2013 and relatively high levels maintained thereafter.
- Current Liabilities
- Current liabilities displayed a persistent downward trend throughout the period. Starting from a high of $4,963 million in 2011, liabilities increased slightly to $5,536 million in 2012 before declining sharply each year thereafter, reaching $4,700 million in 2013, $3,664 million in 2014, and finally $1,841 million in 2015. This reduction suggests improved short-term debt management or reductions in obligations over time.
- Cash Ratio
- The cash ratio, which measures the company’s ability to cover current liabilities with cash and cash equivalents, reflected a marked improvement. Initially low at 0.06 in 2011 and decreasing further to 0.03 in 2012, the ratio increased dramatically to 0.41 in 2013. Although it declined slightly to 0.21 in 2014, it surged again to 0.80 in 2015. This overall improvement suggests a strengthening liquidity position and greater capacity to meet short-term obligations purely with cash.
In summary, the company experienced volatile cash asset levels but significantly decreasing current liabilities, resulting in a strong improvement in the cash ratio over the period. The enhanced liquidity position observed in 2015 reflects sound financial management focused on increasing cash reserves while reducing current liabilities.