Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Baxter International Inc., liquidity ratios
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Current ratio | 2.05 | 1.71 | 1.69 | 1.95 | 1.78 | |
| Quick ratio | 1.58 | 0.95 | 0.96 | 1.20 | 1.10 | |
| Cash ratio | 1.28 | 0.48 | 0.46 | 0.69 | 0.60 |
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 liquidity profile demonstrates a period of relative stability and slight contraction between 2011 and 2014, culminating in a significant expansion of liquid assets by the end of 2015. Overall, the capacity to meet short-term obligations remained adequate throughout the period, with a notable shift toward a highly liquid position in the final year.
- Current Ratio
- The current ratio fluctuated within a healthy range, starting at 1.78 in 2011 and reaching a peak of 2.05 by December 31, 2015. A slight decline was observed in 2013 and 2014, where the ratio dipped to 1.69 and 1.71, respectively, before rebounding strongly. This suggests a consistent ability to cover current liabilities with current assets.
- Quick Ratio
- A downward trend is observed from 2012 (1.20) through 2014, where the ratio fell below the 1.0 threshold to 0.95. This movement indicates a period of increased reliance on inventory to satisfy short-term obligations. However, a sharp recovery occurred in 2015, with the ratio rising to 1.58, signifying a substantial increase in assets that can be converted to cash quickly.
- Cash Ratio
- The cash ratio exhibited the most significant volatility, decreasing from 0.69 in 2012 to a low of 0.46 in 2013. This trend remained relatively stagnant through 2014 before an abrupt increase to 1.28 in 2015. This final surge indicates that by the end of the period, cash and cash equivalents alone were sufficient to cover more than 100% of the current liabilities.
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Current Ratio
Baxter International Inc., 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 | 11,796) | 10,351) | 10,004) | 9,260) | 8,650) | |
| Current liabilities | 5,750) | 6,042) | 5,906) | 4,759) | 4,857) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 2.05 | 1.71 | 1.69 | 1.95 | 1.78 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
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
= 11,796 ÷ 5,750 = 2.05
2 Click competitor name to see calculations.
Analysis of the liquidity position between 2011 and 2015 reveals a generally strengthening capacity to meet short-term obligations, characterized by a consistent expansion of current assets and a fluctuating but controlled level of current liabilities.
- Current Asset Trends
- A steady upward trajectory is observed in current assets, which grew from 8,650 million US$ in 2011 to 11,796 million US$ by 2015. This represents a sustained increase in liquid resources over the five-year period.
- Current Liability Trends
- Current liabilities exhibited more volatility compared to assets. After a slight decrease in 2012, a notable increase occurred in 2013 and 2014, peaking at 6,042 million US$. A subsequent reduction to 5,750 million US$ in 2015 contributed to an improved liquidity profile in the final year of the period.
- Current Ratio Analysis
- The current ratio remained well above 1.0 throughout the analyzed period, indicating a consistent ability to cover short-term debts. The ratio peaked in 2015 at 2.05, following a period of relative compression in 2013 and 2014, where it reached a low of 1.69. The overall trend indicates a strong recovery and enhancement of short-term solvency by the end of 2015.
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Quick Ratio
Baxter International Inc., 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 equivalents | 2,213) | 2,925) | 2,733) | 3,270) | 2,905) | |
| Accounts and other current receivables, net | 1,731) | 2,803) | 2,911) | 2,425) | 2,420) | |
| Investment in Baxalta common stock | 5,148) | —) | —) | —) | —) | |
| Total quick assets | 9,092) | 5,728) | 5,644) | 5,695) | 5,325) | |
| Current liabilities | 5,750) | 6,042) | 5,906) | 4,759) | 4,857) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.58 | 0.95 | 0.96 | 1.20 | 1.10 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
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
= 9,092 ÷ 5,750 = 1.58
2 Click competitor name to see calculations.
The liquidity position experienced significant fluctuations over the five-year period from 2011 to 2015, characterized by a period of contraction in the mid-term followed by a sharp expansion in the final year. The overall trend indicates a transition from a stable liquid position to a temporary deficit, concluding with a substantial increase in short-term solvency.
- Quick Ratio Trends
- The quick ratio began at 1.10 in 2011 and reached 1.20 in 2012. A downward trend followed, with the ratio dropping below the 1.0 threshold in 2013 (0.96) and reaching its lowest point in 2014 (0.95). This indicates a period where highly liquid assets were insufficient to cover total current liabilities. A significant reversal occurred in 2015, where the ratio rose to 1.58, marking the strongest liquidity position in the observed period.
- Total Quick Assets Analysis
- Quick assets remained relatively stable between 2011 and 2014, oscillating between $5,325 million and $5,728 million. However, 2015 saw a substantial increase to $9,092 million, an increase of approximately $3.36 billion over the previous year, which served as the primary driver for the improved liquidity metric.
- Current Liabilities Analysis
- Current liabilities showed a general upward trend from 2011 to 2014, rising from $4,857 million to a peak of $6,042 million. The increase in liabilities during 2013 and 2014 contributed to the decline of the quick ratio below 1.0. In 2015, liabilities decreased to $5,750 million, further augmenting the liquidity headroom when combined with the surge in quick assets.
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Cash Ratio
Baxter International Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and equivalents | 2,213) | 2,925) | 2,733) | 3,270) | 2,905) | |
| Investment in Baxalta common stock | 5,148) | —) | —) | —) | —) | |
| Total cash assets | 7,361) | 2,925) | 2,733) | 3,270) | 2,905) | |
| Current liabilities | 5,750) | 6,042) | 5,906) | 4,759) | 4,857) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.28 | 0.48 | 0.46 | 0.69 | 0.60 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
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
= 7,361 ÷ 5,750 = 1.28
2 Click competitor name to see calculations.
The liquidity profile experienced notable fluctuations over the five-year period from 2011 to 2015, culminating in a significant strengthening of the immediate cash position. The cash ratio, which measures the ability to cover short-term obligations using only cash and cash equivalents, remained below the 1.0 threshold for the majority of the period before spiking in the final year.
- Total Cash Assets
- Cash holdings remained relatively stable between 2011 and 2014, fluctuating within a range of 2,733 million to 3,270 million US dollars. A substantial increase occurred in 2015, where total cash assets surged to 7,361 million US dollars, representing a more than twofold increase from the previous year.
- Current Liabilities
- Short-term obligations showed a general upward trend from 2011 through 2014, rising from 4,857 million to a peak of 6,042 million US dollars. This trend reversed slightly in 2015, with liabilities decreasing to 5,750 million US dollars.
- Cash Ratio Analysis
- The cash ratio initially rose from 0.60 in 2011 to 0.69 in 2012, followed by a decline to 0.46 in 2013 and a marginal recovery to 0.48 in 2014. In 2015, the ratio increased sharply to 1.28, indicating a transition from a position where only a fraction of current liabilities could be covered by cash to a position of high liquidity where current liabilities are fully covered by cash assets.
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