Caterpillar Inc. (NYSE:CAT)

The liquidity ratios over the presented periods reveal several notable trends that suggest changes in the company’s short-term financial stability and asset management efficiency.

Current Ratio

The current ratio demonstrates a gradual decline from 1.6 in the first quarter of 2021 to values fluctuating near 1.3 to 1.4 in recent quarters through 2025. The initial ratio above 1.5 indicates a relatively strong ability to cover current liabilities with current assets early in the period. However, the downward trend to approximately 1.3–1.4 in the later periods reflects a moderate reduction in buffer liquidity, suggesting the company is managing slightly tighter working capital or experiencing relatively greater growth in current liabilities than assets over time.

Quick Ratio

A more pronounced decline is observed in the quick ratio, which drops steadily from 1.08 at the beginning of 2021 to levels below 0.8 in most of the periods from 2023 onward. This decrease signals that the company’s most liquid assets, excluding inventory, have diminished in proportion to current liabilities. This pattern could indicate an increased reliance on inventory for short-term asset coverage or a reduction in cash and receivables relative to obligations, possibly impacting the company's ability to meet immediate liabilities quickly.

Cash Ratio

The cash ratio exhibits the clearest downward trend, falling from 0.43 in the first quarter of 2021 to values often below 0.2 in the later quarters, touching a low near 0.11. This suggests a significant reduction in cash and cash equivalents relative to current liabilities, which may reflect strategic liquidity deployment, increased operating cash outflows, or capital expenditures. The low cash ratio indicates a reduced cushion of cash reserves to cover short-term debts, which reinforces observations from the quick ratio regarding tightened immediate liquidity.

In summary, the company's liquidity position has moderately weakened over the analyzed periods. The decline in the current ratio indicates a tighter margin in covering liabilities with assets, while sharper decreases in the quick and cash ratios highlight constraints in readily available liquid resources. These trends may imply increased working capital demands or strategic shifts in asset structuring but also underline a potentially higher liquidity risk that should be closely monitored going forward.

Current Assets

Current assets exhibited a generally stable pattern from the first quarter of 2021 through mid-2022, fluctuating in a narrow range around 42,000 to 44,000 million US dollars. Starting in early 2023, there was a moderate upward trend, peaking at approximately 48,000 million US dollars in the third quarter of 2023. This was followed by a slight decline and renewed fluctuations in the range of 43,000 to 46,000 million US dollars throughout 2024 and into mid-2025, indicating some variability but no strong directional trend in recent quarters.

Current Liabilities

Current liabilities increased steadily over the observed period. Beginning near 26,500 million US dollars at the start of 2021, liabilities rose consistently, surpassing the 30,000 million mark in late 2021. Through 2023, the upward trajectory continued, peaking close to 35,000 million US dollars in mid-2023. Although some fluctuations occurred thereafter, liabilities remained elevated, maintaining a range between roughly 32,000 to 35,000 million US dollars into mid-2025. This increase signals growing short-term obligations over time.

Current Ratio

The current ratio demonstrated a gradual decline across the period analyzed. Starting from a relatively strong ratio of about 1.6 in the first quarter of 2021, it decreased to rund 1.4 by the end of 2021. This downward trend persisted, with the ratio reaching lows near 1.28 during mid-2024. Despite minor recoveries in some quarters, the overall pattern indicates a decrease in liquidity, as current assets have not kept pace with the increasing current liabilities. By mid-2025, the current ratio remained subdued around 1.3 to 1.34, suggesting a tighter working capital position.

Total quick assets

The total quick assets demonstrate a declining trend from the first quarter of 2021 through mid-2022, decreasing from approximately 28,630 million USD to around 23,329 million USD. Following this period, the values exhibit some recovery and fluctuations, reaching around 25,736 million USD by the end of 2024. Subsequently, another decline is observed in the first half of 2025. Overall, total quick assets show volatility with periods of both contraction and partial recovery over the analyzed timeframe.

Current liabilities

Current liabilities have generally increased from just over 26,578 million USD at the beginning of 2021 to nearly 35,000 million USD by mid-2025. The data reveal a steady upward trend with occasional short-term declines, but the general movement is towards higher liabilities. This indicates a growing obligation level within the company over the examined quarters.

Quick ratio

The quick ratio displays a consistent downward trend across the period, starting at 1.08 in March 2021 and declining to about 0.72 by mid-2025. This decline suggests a weakening short-term liquidity position, indicating that quick assets cover a decreasing portion of current liabilities. Notably, the ratio falls below 1 early in the period and remains below that threshold thereafter, which may imply increased liquidity risk.

Overall insights

The combination of decreasing total quick assets and increasing current liabilities results in a diminishing quick ratio, pointing to a potential challenge in meeting short-term obligations. While total quick assets partially recover at intervals, the persistent rise in liabilities and the corresponding steady decline in the quick ratio suggest that liquidity management should be closely monitored. The data indicate that the company's short-term financial flexibility has weakened over these periods, which could have implications for operational stability and credit standing.

Total cash assets

Over the analyzed period, total cash assets exhibited a general decline from early 2021 through mid-2022, reaching a low point around June 2022. Subsequently, there was a moderate recovery during the latter part of 2022 and into early 2023. However, starting from early 2024, cash assets again decreased significantly, hitting notably low levels by March 2025. This pattern indicates fluctuations with an overall downward trend in cash holdings throughout the observed quarters.

Current liabilities

Current liabilities have generally increased over the period under review. Beginning at a lower level in the first quarter of 2021, liabilities rose steadily, with some periods of sharper increases such as the first half of 2023. The last quarters show liabilities continuing at elevated levels, peaking around mid-2025. This upward trajectory suggests growing short-term obligations or liabilities due within one year, which could have implications for liquidity management.

Cash ratio

The cash ratio consistently declined from 0.43 in the first quarter of 2021 to a low of around 0.11 in early 2025. There were minor fluctuations with slight short-term recoveries, but the general trajectory points to a weakening liquidity position based purely on cash availability relative to current liabilities. The ratio remained below 0.25 after mid-2021, indicating a conservative level of cash to cover short-term obligations.

Overall analysis

The combination of decreasing total cash assets and rising current liabilities led to a marked decline in the cash ratio over the observed timeline. This trend suggests increasing pressure on cash resources to meet immediate financial obligations. For the periods showing cash recovery, the effect on the liquidity ratio was modest and insufficient to reverse the overall downward trend. The company’s liquidity position appears to be weakening, implying a potential need for enhanced working capital management or alternative financing strategies to maintain operational stability.