Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Liquidity Ratios (Summary)
Cummins Inc., liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 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), 10-K (reporting date: 2019-12-31).
- Current Ratio
- The current ratio exhibited an overall declining trend from 2019 to 2023. It increased from 1.5 in 2019 to a peak of 1.88 in 2020, indicating improved short-term liquidity during that period. However, it then decreased steadily, reaching 1.74 in 2021, 1.27 in 2022, and further down to 1.18 by the end of 2023, suggesting a gradual reduction in the company's ability to cover short-term liabilities with current assets over the latter years.
- Quick Ratio
- The quick ratio followed a similar trajectory to the current ratio but exhibited more pronounced fluctuations. It rose significantly from 0.82 in 2019 to 1.21 in 2020, reflecting an enhanced immediate liquidity position excluding inventory. Subsequently, the quick ratio declined to 1.01 in 2021 before dropping sharply to 0.68 in 2022 and slightly lower to 0.65 in 2023. This decline signals a weakened capacity to meet short-term obligations without relying on inventory liquidation.
- Cash Ratio
- The cash ratio displayed considerable variability within the period. Starting from a low base of 0.23 in 2019, it more than doubled to 0.61 in 2020, indicating a significant improvement in liquidity through cash and cash equivalents. Nevertheless, this ratio decreased to 0.45 in 2021 and further declined back to the original level of 0.23 in 2022, continuing its downward trend to 0.21 in 2023. This pattern reflects a diminishing cash buffer relative to current liabilities, potentially indicating tighter cash management or increased cash outflows.
Current Ratio
Cummins Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Current Ratio, Sector | ||||||
| Capital Goods | ||||||
| Current Ratio, Industry | ||||||
| Industrials | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Current Assets
-
Current assets demonstrated a consistent upward trend over the five-year period. Starting at 9,387 million US dollars at the end of 2019, they increased steadily each year, reaching 15,198 million US dollars by the end of 2023. This reflects a significant growth in liquid and short-term assets available to the company, indicating potentially enhanced asset liquidity or accumulation.
- Current Liabilities
-
Current liabilities showed an overall increase, with a notable acceleration beginning in 2021. From 6,260 million US dollars in 2019, liabilities increased modestly to 7,084 million in 2021, then rose sharply to 11,421 million in 2022 and further to 12,903 million by the end of 2023. This sharp increase suggests a rising amount of short-term obligations, possibly reflecting changes in financing strategies or increased operational needs.
- Current Ratio
-
The current ratio, an indicator of short-term liquidity, exhibited fluctuations during the period. It improved from 1.5 in 2019 to a peak of 1.88 in 2020, implying a stronger liquidity position at that time. However, from 2021 onwards, the ratio decreased steadily, falling to 1.74 in 2021 and declining further to 1.18 by the end of 2023. This declining trend suggests that the company's ability to cover short-term liabilities with current assets has weakened over the recent years, potentially driven by the faster growth of current liabilities relative to current assets.
Quick Ratio
Cummins Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Marketable securities | ||||||
| Accounts and notes receivable, net | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Quick Ratio, Sector | ||||||
| Capital Goods | ||||||
| Quick Ratio, Industry | ||||||
| Industrials | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total quick assets
- There is a generally increasing trend in total quick assets over the five-year period. The value rose from 5,140 million US$ in 2019 to 8,324 million US$ in 2023, showing growth with some fluctuations. Notably, there was a peak in 2020 at 7,682 million US$, followed by a slight decline in 2021 to 7,177 million US$, and then continuous growth through 2022 and 2023.
- Current liabilities
- Current liabilities have shown a significant and steady increase throughout the period. Starting at 6,260 million US$ in 2019, current liabilities rose moderately to 6,335 million US$ in 2020, then more sharply increased to 7,084 million US$ in 2021. The growth accelerated notably in the last two years, reaching 11,421 million US$ in 2022 and 12,903 million US$ in 2023.
- Quick ratio
- The quick ratio exhibits a downward trend overall, despite an initial improvement. It increased from 0.82 in 2019 to 1.21 in 2020, indicating a stronger short-term liquidity position at that point. However, it declined afterward, dropping to 1.01 in 2021 and further decreasing significantly to 0.68 in 2022 and 0.65 in 2023. This suggests a weakening in liquidity relative to current liabilities in recent years, likely due to the rapid increase in liabilities outpacing quick assets.
Cash Ratio
Cummins Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Marketable securities | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Cash Ratio, Sector | ||||||
| Capital Goods | ||||||
| Cash Ratio, Industry | ||||||
| Industrials | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets exhibit a significant increase from 2019 to 2020, rising from 1,470 million US dollars to 3,862 million US dollars. Following that peak, a downward trend is observed with cash assets decreasing to 3,187 million in 2021 and further to 2,573 million in 2022. In 2023, there is a slight recovery with cash assets increasing to 2,741 million.
- Current liabilities
- Current liabilities demonstrate a consistent upward trajectory over the entire period. Starting at 6,260 million US dollars in 2019, liabilities mildly increase to 6,335 million in 2020, followed by a more pronounced rise to 7,084 million in 2021. The upward momentum accelerates significantly in 2022, reaching 11,421 million, and continues to grow to 12,903 million in 2023.
- Cash ratio
- The cash ratio shows variability with an initial low ratio of 0.23 in 2019. It then increases sharply to 0.61 in 2020, corresponding with the jump in total cash assets during the same period. Subsequently, the ratio declines steadily over the following years, dropping to 0.45 in 2021, then returning to 0.23 in 2022, and further decreasing to 0.21 in 2023, indicating a reduced liquidity buffer relative to current liabilities despite the earlier cash accumulation.
- Overall observations
- There is a clear pattern of increasing current liabilities across the five-year span, which outpaces changes in cash assets particularly after 2020. Despite the total cash assets peaking in 2020, the decline in subsequent years, coupled with steadily rising liabilities, leads to a weakening cash ratio by the end of the period. This suggests that the company's short-term liquidity position has deteriorated since 2020, with a reduced capacity to cover immediate obligations solely with cash and cash equivalents.