Analysis of Liquidity Ratios
Quarterly Data
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 (quarterly data)
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-29), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
- Current Ratio
- The current ratio exhibits fluctuations over the analyzed period, beginning at 1.57 in the first quarter of 2019. It showed a slight increase reaching a peak of 1.94 in the third quarter of 2020, indicating an improvement in the company's ability to cover short-term liabilities with current assets during that time. Afterward, the ratio gradually declined, reaching a low of 1.18 by the first quarter of 2024. The decrease in recent quarters may suggest a reduction in liquidity relative to current liabilities.
- Quick Ratio
- The quick ratio follows a somewhat similar pattern to the current ratio, though it starts at a lower base of 0.87 in the first quarter of 2019. It increased to a high of 1.22 in the third quarter of 2020, reflecting enhanced immediate liquidity excluding inventories. Subsequently, there was a consistent decline, with the quick ratio falling to 0.65 in the first quarter of 2024. This trend indicates a diminishing capacity to meet short-term obligations with the most liquid assets excluding inventory.
- Cash Ratio
- The cash ratio demonstrated a generally volatile pattern but with clear peaks and subsequent declines. It began at 0.24 in early 2019 and rose to a notable peak of 0.61 in the fourth quarter of 2020, signaling a substantial accumulation of cash and cash equivalents relative to current liabilities at that time. Following this peak, the cash ratio experienced a downward trend, declining to 0.21 by the first quarter of 2024. The recent lower levels suggest a reduced buffer of cash on hand compared to current liabilities.
- Overall Liquidity Trends
- Across all three liquidity indicators, there was a noticeable improvement in the 2020 period, particularly in the third and fourth quarters, which could reflect strategic liquidity management or response to external market conditions. However, from 2021 onwards there is a clear tapering off, with all ratios trending downward through 2023 and into early 2024. This pattern may indicate pressures on liquidity or a shift in asset composition reducing immediate liquid assets or increasing current liabilities. Continuous monitoring is advisable to assess the potential impact on the company's short-term financial stability.
Current Ratio
Cummins Inc., current ratio calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | Dec 31, 2019 | Sep 29, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||||||||
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| 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. | ||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-29), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2024 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data over the period from March 2019 to March 2024 reveals several key trends in liquidity and working capital management.
- Current Assets
- There is an overall upward trend in current assets, increasing from approximately 10,091 million USD in Q1 2019 to around 15,620 million USD by Q1 2024. Notable increments occurred particularly after Q3 2021, with current assets steadily rising and peaking in Q3 2023 at about 15,912 million USD. Some smaller fluctuations are observed, but the general direction is growth in liquid and short-term assets.
- Current Liabilities
- Current liabilities display more volatility compared to current assets. Beginning near 6,427 million USD in Q1 2019, current liabilities fluctuated moderately through 2019 and 2020, with a decrease observed in late 2020. However, starting from early 2022, current liabilities saw a sharp increase, reaching a peak of approximately 12,903 million USD in Q4 2023 before slightly decreasing to 11,686 million USD by Q1 2024. This suggests higher short-term obligations in the recent period, potentially reflecting increased operational expenses or short-term financing.
- Current Ratio
- The current ratio, a measure of short-term liquidity calculated as current assets divided by current liabilities, exhibits notable fluctuations that align with the movements in current assets and liabilities. It started at 1.57 in Q1 2019, experienced a dip to about 1.4 in mid-2020, then rose sharply to highs near 1.94 in Q3 2020, indicating improved liquidity at that time. Afterward, the ratio steadily declined from 2021 into early 2023, bottoming out around 1.18 by the end of 2023, suggesting a compression in liquidity margin. In Q1 2024, a slight recovery to 1.34 was observed but remained below earlier years' levels, indicating tighter short-term financial flexibility in recent quarters.
In summary, while current assets have generally increased over the five-year span, the more rapid rise in current liabilities during the latest periods has resulted in a declining current ratio, indicating a potential risk to short-term liquidity. This trend suggests that the company may be facing increased short-term financial commitments relative to its liquid resources. Ongoing monitoring of working capital efficiency and liability management is recommended to maintain an adequate liquidity position.
Quick Ratio
Cummins Inc., quick ratio calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | Dec 31, 2019 | Sep 29, 2019 | Jun 30, 2019 | Mar 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. | ||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-29), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2024 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The quarterly financial data indicates notable fluctuations and trends in liquidity measures over the analyzed periods. The data on total quick assets, current liabilities, and quick ratio provide insight into the company's short-term financial health.
- Total Quick Assets
- The total quick assets demonstrated a generally increasing trend over the examined timeframe. Starting at approximately 5,599 million USD in the first quarter of 2019, these assets increased gradually with some fluctuations, reaching a peak near 8,726 million USD by the first quarter of 2024. A significant rise is observable from mid-2020 onward, with notable growth occurring around 2022 and maintained into 2023 and early 2024, reflecting an improvement in liquid asset availability.
- Current Liabilities
- Current liabilities values exhibited pronounced variability. Initially around 6,427 million USD in early 2019, the figures remained relatively stable with moderate fluctuations until late 2020. From 2021 forward, liabilities showed a marked increasing pattern, surging from approximately 6,660 million USD in early 2021 to a peak exceeding 12,900 million USD by the end of 2023. Despite a slight decline in the first quarter of 2024, current liabilities remained elevated compared to earlier periods, indicating increased short-term obligations.
- Quick Ratio
- The quick ratio, an indicator of short-term liquidity adequacy, experienced significant changes throughout the periods. The ratio hovered below or near 1.0 through 2019 and early 2020, reaching a high of approximately 1.22 in the third quarter of 2020, suggesting improved liquidity relative to current liabilities at that time. However, starting in 2021, the quick ratio showed a declining trend, dropping steadily to around 0.65 by late 2023, before a moderate recovery to 0.73 in early 2024. This decline suggests that despite increasing quick assets, current liabilities grew at a faster rate, eroding the company's immediate liquidity cushion.
In summary, the data reflects an overall growth in liquid assets, accompanied by an even stronger increase in current liabilities over recent years, resulting in a diminished quick ratio. The decreasing quick ratio, particularly pronounced after 2020, implies a reduced capacity to cover short-term liabilities with the most liquid assets, denoting a potential area of focus for working capital management.
Cash Ratio
Cummins Inc., cash ratio calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | Dec 31, 2019 | Sep 29, 2019 | Jun 30, 2019 | Mar 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. | ||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-29), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2024 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends in liquidity and short-term financial position over the period examined.
- Total Cash Assets
- The total cash assets exhibit a fluctuating pattern with a general upward trend from early 2019 through the end of 2020, starting at approximately 1.57 billion USD and peaking near 3.86 billion USD by December 2020. Following this peak, cash assets decline steadily throughout 2021 and 2022, reaching a low of about 2.57 billion USD at the end of 2022. A minor recovery is observed during 2023, with cash assets rising again to the range of 3.06 billion USD by the third quarter. The most recent quarter shows a slight reduction to approximately 3.05 billion USD.
- Current Liabilities
- Current liabilities demonstrate an overall increasing trend over the observed quarters. Starting from around 6.43 billion USD at the beginning of 2019, liabilities remain relatively stable with minor fluctuations until mid-2020, after which there is a marked reduction toward late 2020. Thereafter, liabilities rise consistently each quarter through 2021 and accelerate significantly in 2022, peaking at approximately 11.92 billion USD in the third quarter of 2022. The liabilities decline modestly by the end of 2023 before witnessing a renewed increase in the first quarter of 2024, ending near 11.69 billion USD.
- Cash Ratio
- The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, starts at a relatively low value of 0.24 in early 2019. This ratio increases notably in 2020, reaching a high of 0.61 by the end of that year, indicating improved liquidity. However, from 2021 onwards, the cash ratio steadily declines, falling to 0.28 by the beginning of 2024. Despite minor fluctuations, this downward trend suggests diminishing short-term liquidity relative to current liabilities over the most recent quarters.
In summary, the financial data suggests an initial strengthening of liquidity throughout 2019 and 2020, supported by increasing cash assets and a higher cash ratio despite fluctuations in current liabilities. However, from 2021 forward, the company is facing rising current liabilities coupled with a declining cash ratio, which points to a weakening in the immediate liquidity position. The decline in cash ratio is notable because it implies that cash and cash equivalents are covering a smaller portion of current liabilities than in previous years, potentially increasing short-term financial risk. The fluctuations in cash assets throughout 2023 indicate some recovery efforts but remain below the peak levels observed in late 2020.