DuPont de Nemours Inc. (NYSE:DD)

Liquidity metrics for the period between 2015 and 2019 exhibit a general pattern of stability followed by a significant contraction in the final year. While a robust capacity to meet short-term obligations was maintained for the majority of the period, all three primary liquidity ratios experienced a sharp decline by the end of 2019, indicating a weakened short-term financial position.

Current Ratio

The current ratio remained relatively stable between 2015 and 2018, fluctuating within a range of 1.88 to 2.18, which suggested a strong cushion of current assets over current liabilities. However, a substantial decrease occurred in 2019, with the ratio falling to 1.20, representing a marked reduction in the overall liquidity margin.

Quick Ratio

The quick ratio followed a similar trajectory, maintaining levels between 1.20 and 1.46 from 2015 through 2018. In 2019, this metric dropped sharply to 0.64, falling below the 1.0 threshold. This indicates that by the end of the period, highly liquid assets were no longer sufficient to cover current liabilities without relying on the sale of inventory.

Cash Ratio

The cash ratio experienced the most pronounced decline over the analyzed period. From a peak of 0.76 in 2015, the ratio stabilized between 0.52 and 0.55 from 2016 to 2018, before plummeting to 0.18 in 2019. This trend reveals a severe reduction in the availability of cash and cash equivalents relative to short-term debt obligations.

The liquidity position from 2015 to 2019 is characterized by a period of relative stability and strong coverage, followed by a significant contraction in the final year. While the current ratio remained consistently above 1.80 between 2015 and 2018, a notable decline occurred in 2019, indicating a tightening of short-term liquidity.

Current Ratio Stability and Fluctuation

Between 2015 and 2018, the current ratio fluctuated within a healthy range, peaking at 2.18 in 2015 and reaching a period low of 1.88 in 2016. This trend suggests that current assets were consistently maintained at approximately double the value of current liabilities, providing a substantial buffer for meeting short-term obligations.

Balance Sheet Expansion

A significant increase in the scale of short-term financial positions occurred in 2017. Current assets rose from 23,659 million in 2016 to 49,893 million in 2017, while current liabilities increased from 12,604 million to 26,128 million. Despite this massive expansion in the volume of assets and liabilities, the current ratio remained stable at 1.91 in 2017 and 2.01 in 2018, demonstrating a proportional increase in liquidity resources relative to obligations.

Liquidity Contraction in 2019

A sharp contraction in the balance sheet is observed in 2019, with current assets falling to 9,999 million and current liabilities decreasing to 8,346 million. This substantial reduction in scale coincided with a decrease in the current ratio to 1.20. This represents the lowest liquidity level of the analyzed period and indicates a diminished margin of safety for covering short-term liabilities compared to previous years.

The analysis of the liquidity position from 2015 to 2019 reveals a period of relative stability followed by a severe contraction in the final year of the observed period.

Liquidity Stability and Scaling (2015–2018)

Between 2015 and 2018, the quick ratio remained consistently above 1.20, peaking at 1.46 in 2015. This range suggests a robust ability to meet short-term obligations without relying on the sale of inventory. A notable expansion in the balance sheet occurred in 2017, where total quick assets increased to 31,287 million and current liabilities rose to 26,128 million. Despite this significant increase in the volume of current obligations, the quick ratio remained stable at 1.20, indicating that the growth in liquid assets scaled proportionally with the increase in liabilities.

Liquidity Deterioration (2019)

A sharp decline in the liquidity profile is evident in 2019, with the quick ratio dropping to 0.64. This shift is characterized by a precipitous reduction in total quick assets, which fell from 30,955 million in 2018 to 5,342 million in 2019. While current liabilities also decreased to 8,346 million, the reduction in liquid assets was far more aggressive. This resulted in a deficit where the company's most liquid assets were no longer sufficient to cover its immediate current liabilities, marking a significant departure from the liquidity levels maintained in the preceding four years.

The liquidity position of the entity exhibited significant volatility between 2015 and 2019, characterized by a substantial overall decline in the cash ratio. While the period began with a relatively strong liquidity posture, it concluded with a marked reduction in the ability to cover short-term obligations using only cash assets.

Cash Asset Trends

Total cash assets fluctuated considerably over the five-year period. After a decrease from 8,577 million US$ in 2015 to 6,607 million US$ in 2016, there was a sharp increase, peaking at 14,394 million US$ in 2017. This elevated level remained relatively stable through 2018 at 13,616 million US$, before experiencing a precipitous decline to 1,540 million US$ by December 31, 2019.

Current Liabilities Dynamics

Current liabilities saw a period of rapid expansion between 2015 and 2017, increasing from 11,215 million US$ to a peak of 26,128 million US$. Liabilities remained high in 2018 at 24,715 million US$ before dropping sharply to 8,346 million US$ in 2019, mirroring the scale of the reduction in cash assets.

Cash Ratio Analysis

The cash ratio declined from a high of 0.76 in 2015 to 0.18 in 2019. A period of relative stability was observed between 2016 and 2018, where the ratio fluctuated minimally between 0.52 and 0.55. However, the sharp contraction in 2019 represents a significant deterioration in immediate liquidity, as the entity's cash reserves became insufficient to cover nearly 82% of its current liabilities.