Chevron Corp. (NYSE:CVX)

The analysis of liquidity ratios over multiple quarters reveals several notable trends and fluctuations.

Current Ratio

The current ratio exhibits an overall moderate increase from early 2020 through late 2022, moving from approximately 1.01 in March 2020 to a peak around 1.47 in December 2022. This indicates a generally improving ability to cover short-term liabilities with current assets during this period. However, starting from early 2023, the ratio shows a declining trend, decreasing gradually to values close to 1.06 by the first quarter of 2025. Despite this reduction, the ratio consistently remains above 1.0, suggesting the company maintains sufficient current assets relative to current liabilities throughout the timeline.

Quick Ratio

The quick ratio follows a somewhat similar pattern to the current ratio but with more variability. It rises from 0.66 in March 2020 to a high of 1.12 in December 2022, reflecting increasing liquidity in terms of the most liquid current assets (excluding inventories). Subsequent quarters show a decline from early 2023 onwards, reaching about 0.68 by March 2025. This decline indicates a weakening in the ability to promptly cover current liabilities with the most liquid assets. The ratio remains below the current ratio at all times, as expected, and moves closer to the 0.7 level towards the end of the period, which is moderate but lower compared to peaks observed in 2022.

Cash Ratio

The cash ratio displays the greatest volatility among the three liquidity measures. It begins around 0.30 in early 2020, falls to a low near 0.18 in December 2020, then rises sharply to a peak of 0.52 in December 2022. This spike suggests a substantial accumulation of cash and cash equivalents relative to current liabilities by the end of 2022. Following this peak, the cash ratio sharply declines through 2023 and 2024, reaching its lowest levels around 0.12 to 0.19. A slight uptick occurs toward the first quarter of 2025, though remaining below earlier years' levels. This pattern indicates periods of cash accumulation and utilization, reflecting changes in cash management strategy or operational cash flow conditions.

In summary, liquidity indicators show improvement through late 2022, characterized by stronger coverage of short-term obligations and increased cash reserves. However, early 2023 onwards reveals a consistent decline across all ratios, particularly the cash ratio, signaling a reduction in immediate liquidity buffers. The current and quick ratios, while lower post-2022 peak, remain near or above acceptable liquidity thresholds, implying ongoing ability to meet short-term liabilities albeit with less cushion than in preceding quarters.

The analysis of the quarterly financial data reveals notable trends in the liquidity position as observed through current assets, current liabilities, and the current ratio over the observed periods.

Current Assets

Current assets demonstrate an overall increasing trend from March 31, 2020, through March 31, 2025, despite some fluctuations. Initially, current assets decreased from 28,562 million USD in March 2020 to a trough of 23,732 million USD in June 2020. Following this dip, the balance steadily increased, reaching a peak of 51,503 million USD by September 2022. After this peak, current assets saw a decline, falling back to around 38,574 million USD by March 2025. This reflects periods of growth and contraction, with the general tendency toward improvement relative to the initial point.

Current Liabilities

Current liabilities also experienced fluctuations throughout the timeframe. There was a significant decline from 28,235 million USD in March 2020 to 19,664 million USD in September 2020, followed by an upward trend reaching levels around 39,121 million USD in June 2022. Subsequently, current liabilities began a gradual decrease with some oscillation, ending near 35,702 million USD by March 2025. Overall, current liabilities have moved in tandem with current assets but exhibit more volatility, particularly in mid-2020 and mid-2022 periods.

Current Ratio

The current ratio, indicative of short-term liquidity, has varied within a range but generally stayed above 1.00 throughout the period, implying the company maintained the ability to cover its short-term obligations with its current assets. Early in 2020, the ratio ranged from a low of 1.01 in March 2020 to a high of 1.26 in September 2020. The ratio peaked at 1.47 in December 2022, showing strong liquidity conditions during that period. However, a gradual decline is observed following this peak, coming down to 1.08 by March 2025. Despite this decline, the ratio remains above unity, suggesting adequate liquidity but with a diminishing cushion over time.

In summary, the company showed an initial contraction in assets and liabilities during early 2020, followed by a phase of asset and liability growth with current assets outpacing liabilities to improve liquidity ratios, peaking in late 2022. Post-peak, both current assets and liabilities decreased with liabilities stabilizing at slightly elevated levels compared to early 2020. The current ratio reflects this move as it decreases from its high while still maintaining a level above 1.0, indicating liquidity remains sufficient but with a reduced margin of safety going forward.

Trend in Total Quick Assets

The total quick assets exhibited a fluctuating pattern over the observed periods. Initially, from March 2020 to December 2020, a gradual increase was noted from approximately 18.7 billion to 17.1 billion US dollars with minor variability. Following this, a significant rise occurred in 2021, peaking near 24.1 billion US dollars by December 2021. In 2022, the total quick assets reached their highest levels, ranging between about 34.8 billion and 38.2 billion US dollars, indicating strengthened liquid asset positions during this year. However, starting from March 2023, a downward trend is observable, with a decline to around 27.9 billion by September 2023, and further decreases through the end of 2024, falling to approximately 24.2 billion by March 2025.

Trend in Current Liabilities

Current liabilities demonstrated considerable volatility across the quarters. Beginning at about 28.2 billion US dollars in March 2020, there was a notable decrease to approximately 19.7 billion by September 2020. In 2021, current liabilities steadily increased, reaching nearly 26.8 billion US dollars by December 2021. This upward movement accelerated in 2022, with liabilities peaking at roughly 39.1 billion US dollars in June 2022 before moderately declining to around 34.2 billion by December of the same year. Throughout 2023 and 2024, current liabilities consistently remained elevated, fluctuating between approximately 29.8 billion and 38.6 billion US dollars, with a slight reduction to about 35.7 billion US dollars by March 2025.

Analysis of Quick Ratio

The quick ratio, reflecting liquidity relative to current liabilities, improved substantially from 0.66 in March 2020 to a peak of 1.12 in December 2021 and again in December 2022. This indicates that, at these points, quick assets were at least equal to or exceeded current liabilities, implying a strong liquidity position. After December 2022, the quick ratio declined steadily, falling below 1.0 by June 2023 and continuing downward through the subsequent periods to 0.68 by March 2025. This decrease suggests a diminishing buffer of liquid assets relative to short-term obligations, indicating a trend toward comparatively lower liquidity.

Summary of Financial Position Trends

Overall, the data reveals an initial phase of strengthening liquidity through 2021 and 2022, as evidenced by rising quick assets and supportive quick ratio values. However, from 2023 onward, both total quick assets and the quick ratio exhibit downward trends, while current liabilities remain elevated, suggesting increasing liquidity pressure. This may warrant closer attention to short-term financial management and potential measures to reinforce liquid asset holdings relative to imminent liabilities.

Total Cash Assets

The total cash assets exhibited notable fluctuations over the observed quarters. Initially, there was a decline from 8,542 million USD in March 2020 to a low of 5,627 million USD in December 2020. This was followed by a recovery phase where cash increased significantly, peaking at 17,901 million USD in December 2022. Subsequently, a downward trend emerged, with cash levels decreasing to 4,643 million USD by March 2025. These fluctuations suggest periods of varying liquidity management, possibly reflecting operational cash flow changes or strategic financial decisions.

Current Liabilities

Current liabilities showed considerable variation throughout the periods. Beginning at 28,235 million USD in March 2020, liabilities generally rose, reaching a peak of 39,121 million USD in June 2022. After this high, a slight decreasing trend was observed toward the end of the timeline, with current liabilities stabilizing around 35,702 million USD by March 2025. The overall upward movement in current liabilities could indicate increased short-term obligations or changes in working capital requirements during these years.

Cash Ratio

The cash ratio, an indicator of short-term liquidity, displayed a fluctuating pattern that generally mirrored the movement in cash assets relative to current liabilities. Starting at 0.30 in March 2020, the ratio experienced some volatility, dropping to a low of 0.12 in September 2024. A peak ratio of 0.52 was observed in December 2022, corresponding with the highest cash asset levels. The subsequent decline in cash ratio over the last two years points to a reduction in readily available cash when compared to current liabilities, potentially signaling tighter liquidity conditions.