Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Caterpillar Inc., liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.42 | 1.35 | 1.39 | 1.46 | 1.53 | |
| Quick ratio | 0.80 | 0.74 | 0.79 | 0.89 | 1.02 | |
| Cash ratio | 0.21 | 0.20 | 0.22 | 0.31 | 0.36 |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Current Ratio
- The current ratio exhibits a consistent decline from 1.53 in 2020 to 1.35 in 2023, suggesting a gradual decrease in liquidity over this period. However, in 2024, there is a slight rebound to 1.42, indicating a modest improvement in the company’s ability to cover short-term liabilities with current assets.
- Quick Ratio
- The quick ratio shows a more pronounced downward trend compared to the current ratio, falling from 1.02 in 2020 to 0.74 in 2023. This decline points to a weakened position in terms of liquid assets readily available to meet immediate obligations. In 2024, a marginal increase to 0.80 is observed, reflecting a slight enhancement in near-cash asset liquidity.
- Cash Ratio
- There is a steady decrease in the cash ratio from 0.36 in 2020 to 0.20 in 2023, indicating diminishing cash reserves relative to current liabilities. The ratio remains relatively stable in 2024 with a minor increase to 0.21, which still signifies low cash availability compared to earlier in the period.
Current Ratio
Caterpillar Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 45,682) | 46,949) | 43,785) | 43,455) | 39,464) | |
| Current liabilities | 32,272) | 34,728) | 31,531) | 29,847) | 25,717) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.42 | 1.35 | 1.39 | 1.46 | 1.53 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Boeing Co. | 1.32 | 1.14 | 1.22 | 1.33 | 1.39 | |
| Eaton Corp. plc | 1.50 | 1.51 | 1.38 | 1.04 | 1.56 | |
| GE Aerospace | 1.09 | 1.18 | 1.16 | 1.28 | 1.58 | |
| Honeywell International Inc. | 1.31 | 1.27 | 1.25 | 1.30 | 1.47 | |
| Lockheed Martin Corp. | 1.13 | 1.21 | 1.32 | 1.42 | 1.39 | |
| RTX Corp. | 0.99 | 1.04 | 1.09 | 1.19 | 1.21 | |
| Current Ratio, Sector | ||||||
| Capital Goods | 1.23 | 1.18 | 1.22 | 1.31 | 1.43 | |
| Current Ratio, Industry | ||||||
| Industrials | 1.19 | 1.16 | 1.20 | 1.29 | 1.41 | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Current ratio = Current assets ÷ Current liabilities
= 45,682 ÷ 32,272 = 1.42
2 Click competitor name to see calculations.
The analysis of the financial data over the five-year period reveals several key trends in the company's liquidity position and balance sheet structure.
- Current Assets
- The value of current assets demonstrated an overall upward trend from 39,464 million US dollars in 2020 to 45,682 million US dollars in 2024. The increase was fairly steady, peaking at 46,949 million US dollars in 2023 before experiencing a slight decline in 2024. This suggests an expansion in the company's short-term resources over the period, providing a stronger base for meeting near-term obligations.
- Current Liabilities
- Current liabilities increased consistently from 25,717 million US dollars in 2020 to 32,272 million US dollars in 2024, with the highest point recorded in 2023 at 34,728 million US dollars. The rising trend in current liabilities indicates growing short-term obligations, which can impact liquidity if not matched by asset growth.
- Current Ratio
- The current ratio steadily declined from 1.53 in 2020 to a low of 1.35 in 2023, before improving to 1.42 in 2024. Although the ratio remained above 1 throughout, indicating adequate short-term liquidity, the downward trend until 2023 points to a relative decrease in the company's ability to cover current liabilities with current assets. The slight recovery in 2024 may suggest improved management of working capital or a rebalancing between assets and liabilities.
Overall, despite the growth in current assets, the faster increase in current liabilities led to a compression of the liquidity cushion over the period analyzed. The modest rebound in the current ratio during the final year indicates some stabilization in short-term financial health. Continuous monitoring will be essential to ensure the company maintains sufficient liquidity to meet its obligations without risking operational disruptions.
Quick Ratio
Caterpillar Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 6,889) | 6,978) | 7,004) | 9,254) | 9,352) | |
| Receivables, trade and other | 9,282) | 9,310) | 8,856) | 8,477) | 7,317) | |
| Receivables, finance | 9,565) | 9,510) | 9,013) | 8,898) | 9,463) | |
| Total quick assets | 25,736) | 25,798) | 24,873) | 26,629) | 26,132) | |
| Current liabilities | 32,272) | 34,728) | 31,531) | 29,847) | 25,717) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.80 | 0.74 | 0.79 | 0.89 | 1.02 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Boeing Co. | 0.39 | 0.28 | 0.32 | 0.34 | 0.41 | |
| Eaton Corp. plc | 0.85 | 0.91 | 0.73 | 0.54 | 0.68 | |
| GE Aerospace | 0.78 | 0.78 | 0.81 | 0.93 | 1.27 | |
| Honeywell International Inc. | 0.88 | 0.84 | 0.88 | 0.94 | 1.15 | |
| Lockheed Martin Corp. | 0.92 | 0.99 | 1.09 | 1.15 | 1.05 | |
| RTX Corp. | 0.60 | 0.63 | 0.69 | 0.81 | 0.78 | |
| Quick Ratio, Sector | ||||||
| Capital Goods | 0.62 | 0.60 | 0.64 | 0.71 | 0.83 | |
| Quick Ratio, Industry | ||||||
| Industrials | 0.69 | 0.66 | 0.72 | 0.80 | 0.87 | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 25,736 ÷ 32,272 = 0.80
2 Click competitor name to see calculations.
The financial data reveals several noteworthy trends in the company's liquidity position over the five-year period from 2020 to 2024. Analysis focuses on total quick assets, current liabilities, and the resulting quick ratio.
- Total Quick Assets
- Total quick assets exhibit relative stability throughout the period, with slight fluctuations. Starting at approximately 26.1 billion US dollars in 2020, quick assets increased modestly to 26.6 billion in 2021, followed by a decline to about 24.9 billion in 2022. The subsequent years show a mild recovery, ending at around 25.7 billion in 2024. This pattern suggests overall maintenance of liquid assets with minor declines and recoveries.
- Current Liabilities
- Current liabilities show a consistent upward trajectory from 25.7 billion US dollars in 2020 to a peak of approximately 34.7 billion in 2023, before decreasing to roughly 32.3 billion in 2024. This increase over time indicates a growing short-term obligation burden, which could pressure liquidity if not matched by proportional increases in liquid assets.
- Quick Ratio
- The quick ratio, which measures the company's ability to cover current liabilities using its most liquid assets, demonstrates a declining trend from 1.02 in 2020 to a low of 0.74 in 2023, with a slight improvement to 0.80 in 2024. Values below 1 suggest that the company may not have sufficient liquid assets to cover its short-term liabilities fully, signaling potential liquidity concerns.
Overall, despite the relative steadiness in quick assets, rising current liabilities have contributed to a weakening quick ratio over the analyzed period. The slight rebound in 2024 indicates some improvement in liquidity management, yet the ratio remains below the generally preferred benchmark of 1. This situation implies the company might face challenges in liquidating assets promptly to meet short-term obligations, highlighting an area warranting ongoing monitoring and possible strategic adjustments.
Cash Ratio
Caterpillar Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 6,889) | 6,978) | 7,004) | 9,254) | 9,352) | |
| Total cash assets | 6,889) | 6,978) | 7,004) | 9,254) | 9,352) | |
| Current liabilities | 32,272) | 34,728) | 31,531) | 29,847) | 25,717) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.21 | 0.20 | 0.22 | 0.31 | 0.36 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Boeing Co. | 0.27 | 0.17 | 0.19 | 0.20 | 0.29 | |
| Eaton Corp. plc | 0.26 | 0.34 | 0.09 | 0.08 | 0.19 | |
| GE Aerospace | 0.42 | 0.45 | 0.44 | 0.54 | 0.78 | |
| Honeywell International Inc. | 0.52 | 0.44 | 0.51 | 0.59 | 0.79 | |
| Lockheed Martin Corp. | 0.13 | 0.09 | 0.16 | 0.26 | 0.23 | |
| RTX Corp. | 0.11 | 0.14 | 0.16 | 0.22 | 0.25 | |
| Cash Ratio, Sector | ||||||
| Capital Goods | 0.26 | 0.24 | 0.26 | 0.32 | 0.44 | |
| Cash Ratio, Industry | ||||||
| Industrials | 0.31 | 0.29 | 0.32 | 0.39 | 0.47 | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 6,889 ÷ 32,272 = 0.21
2 Click competitor name to see calculations.
The financial data reveals several notable trends regarding the liquidity profile and short-term obligations over the five-year period analyzed.
- Total cash assets
- There is a clear declining trend in total cash assets from US$9,352 million at the end of 2020 to US$6,889 million as of the end of 2024. The most significant decrease appears between 2021 and 2022, with a drop of approximately US$2,250 million, followed by a more gradual decline through to 2024.
- Current liabilities
- Current liabilities have generally increased over the same period, rising from US$25,717 million in 2020 to a peak of US$34,728 million at the end of 2023, before falling back slightly to US$32,272 million in 2024. This pattern indicates growing short-term obligations, with the highest level recorded just before 2024.
- Cash ratio
- The cash ratio, which measures the ability to cover current liabilities with cash and cash equivalents, shows a consistent downward trend from 0.36 in 2020 to a low of 0.20 in 2023, with a marginal increase to 0.21 in 2024. This declining ratio highlights a weakening liquidity position, as the proportion of cash relative to current liabilities diminishes significantly over time.
In summary, the data indicates decreasing cash holdings alongside rising current liabilities, resulting in a reduced cash ratio. This suggests a potential concern regarding short-term liquidity management, as the company holds progressively less cash relative to its current obligations over the five-year span. The slight uptick in the cash ratio in the final year may indicate initial efforts towards stabilizing liquidity, but overall, the trend points to increased liquidity risk.