Carrier Global Corp. (NYSE:CARR)

The liquidity profile remains generally stable over the analyzed three-year period, with a consistent capacity to meet short-term obligations. While the broad current ratio showed minimal fluctuation, more stringent liquidity measures exhibited a temporary contraction in 2021 followed by a recovery in 2022.

Current Ratio

The current ratio remained resilient, moving from 1.67 in 2020 to 1.72 in 2021, and settling at 1.64 in 2022. This indicates a sustained margin of safety, as current assets consistently exceeded current liabilities by a significant margin throughout the period.

Quick Ratio

A more volatile trend is observed in the quick ratio, which declined from 1.15 in 2020 to 0.81 in 2021, before rebounding to 1.05 in 2022. The dip in 2021 suggests a period where less liquid current assets, such as inventory, represented a larger portion of the asset base or current liabilities experienced a temporary increase.

Cash Ratio

The cash ratio mirrored the trajectory of the quick ratio, decreasing from 0.61 in 2020 to 0.45 in 2021, and subsequently rising to 0.58 in 2022. This confirms that the liquidity tightening observed in 2021 was largely driven by a reduction in cash and cash equivalents relative to current liabilities.

The divergence between the stable current ratio and the fluctuating quick and cash ratios suggests that while overall short-term solvency was maintained, the composition of current assets shifted. The recovery observed in 2022 indicates a restoration of highly liquid reserves, returning the liquidity posture to levels nearly equivalent to those seen in 2020.

The current ratio exhibited a generally stable pattern over the observed period. Initial values indicate a healthy liquidity position, with a slight improvement in 2021, followed by a modest decline in the most recent year.

Current Ratio Trend

The current ratio began at 1.67 in 2020. It increased to 1.72 in 2021, representing a marginal improvement in the company’s ability to cover short-term obligations with short-term assets. Subsequently, the ratio decreased to 1.64 in 2022. This suggests a slight weakening in the short-term liquidity position, although it remains above the initial 2020 level.

Fluctuations in both current assets and current liabilities contributed to the observed trend. Current assets increased significantly from 2020 to 2021, driving the improvement in the current ratio. However, a decrease in current assets in 2022, coupled with relatively stable current liabilities, resulted in the ratio’s decline.

Asset and Liability Relationship

Current liabilities increased from US$5,110 million in 2020 to US$6,627 million in 2021, but then decreased slightly to US$6,032 million in 2022. Current assets followed a similar pattern of increase and decrease, moving from US$8,524 million in 2020 to US$11,407 million in 2021, and then to US$9,879 million in 2022. The interplay between these two components determined the overall current ratio.

Despite the slight decrease in 2022, the current ratio consistently remained above 1.60 throughout the period, indicating that the company generally possesses more current assets than current liabilities. This suggests a reasonable capacity to meet its short-term obligations.

A volatile trend in short-term liquidity is evident over the observed three-year period. The quick ratio experienced a notable contraction in 2021 before rebounding toward baseline levels in 2022.

Quick Ratio Volatility

The quick ratio declined from 1.15 in 2020 to 0.81 in 2021, indicating a period where liquid assets were insufficient to cover immediate current liabilities. However, the ratio recovered to 1.05 by the end of 2022, suggesting a return to a more stable liquidity position where liquid assets once again exceed short-term obligations.

Quick Asset Fluctuations

Total quick assets decreased from 5,896 million US$ in 2020 to 5,390 million US$ in 2021. This was followed by a significant increase to 6,353 million US$ in 2022, representing the highest liquid asset balance within the analyzed timeframe.

Current Liability Trends

Short-term obligations peaked in 2021 at 6,627 million US$, a substantial increase from the 5,110 million US$ reported in 2020. This spike in liabilities contributed heavily to the dip in the quick ratio. By 2022, current liabilities were reduced to 6,032 million US$, aiding the overall recovery of the liquidity ratio.

The liquidity position of Carrier Global Corp. experienced a period of volatility between 2020 and 2022, characterized by a decline in immediate liquidity in 2021 followed by a partial recovery in 2022. The cash ratio, which measures the ability to cover short-term obligations using only the most liquid assets, fluctuated from 0.61 to 0.45 before rising to 0.58.

Total Cash Assets

Cash reserves exhibited a slight contraction in 2021, decreasing from 3,115 million USD to 2,987 million USD. However, a significant increase was observed by December 31, 2022, with assets rising to 3,520 million USD, marking the highest cash level within the analyzed three-year period.

Current Liabilities

Short-term obligations increased sharply in 2021, rising from 5,110 million USD to 6,627 million USD. This peak was followed by a reduction to 6,032 million USD in 2022, indicating a decrease in the company's immediate financial obligations toward the end of the period.

Cash Ratio Dynamics

The decline of the cash ratio to 0.45 in 2021 was a result of the simultaneous increase in current liabilities and a marginal decrease in cash assets. The recovery to 0.58 in 2022 was driven by the combined effect of expanding cash reserves and the reduction of current liabilities. While the ratio improved in the final year, it remained consistently below 1.0, suggesting that the company does not maintain enough cash on hand to cover all current liabilities instantaneously, relying instead on other current assets or ongoing operational cash flows.