Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
EMC Corp., liquidity ratios
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.17 | 1.34 | 1.46 | 1.18 | 1.12 | |
| Quick ratio | 1.03 | 1.09 | 1.23 | 0.93 | 0.89 | |
| Cash ratio | 0.72 | 0.71 | 0.90 | 0.60 | 0.61 |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
Liquidity ratios for the five-year period ending December 31, 2015, exhibit a synchronized pattern characterized by a peak in 2013 followed by a gradual moderation. The overall liquidity position remained stable, with the company maintaining short-term assets that consistently met or exceeded current liabilities across the reported timeframe.
- Current Ratio
- The current ratio trended upward from 1.12 in 2011 to a period peak of 1.46 in 2013. A subsequent downward trend is observed through 2014 and 2015, with the ratio closing at 1.17. The maintenance of a ratio above 1.0 throughout the duration indicates a continuous capacity to cover short-term obligations.
- Quick Ratio
- The quick ratio followed a trajectory similar to the current ratio, increasing from 0.89 in 2011 to 1.23 in 2013. A notable transition occurred between 2012 and 2013, where the ratio moved from a position below 1.0 to a position of strength. Despite a decline in the following two years, the ratio remained above the 1.0 threshold, ending at 1.03 in 2015, which suggests an improved ability to meet immediate liabilities without relying on inventory.
- Cash Ratio
- The cash ratio remained nearly stagnant between 2011 and 2012, moving from 0.61 to 0.60. A sharp increase to 0.90 was recorded in 2013, coinciding with the peaks of the other liquidity measures. This was followed by a correction to 0.71 in 2014 and relative stability at 0.72 in 2015. The volatility in this ratio suggests a significant influx of cash or cash equivalents specifically during the 2013 fiscal year.
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Current Ratio
EMC Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 15,063) | 15,733) | 17,278) | 12,209) | 11,583) | |
| Current liabilities | 12,885) | 11,710) | 11,799) | 10,304) | 10,376) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.17 | 1.34 | 1.46 | 1.18 | 1.12 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Current ratio = Current assets ÷ Current liabilities
= 15,063 ÷ 12,885 = 1.17
2 Click competitor name to see calculations.
The liquidity position of the entity exhibits a period of expansion followed by a gradual contraction between 2011 and 2015. The current ratio demonstrates a positive trend in the first three years, peaking in 2013 before declining toward the end of the period.
- Current Asset Trends
- Current assets experienced significant growth from US$ 11,583 million in 2011 to a peak of US$ 17,278 million in 2013. Following this peak, a downward trajectory was observed, with assets decreasing to US$ 15,063 million by December 31, 2015.
- Current Liability Trends
- Current liabilities remained relatively stable during the 2011-2012 period before increasing to US$ 11,799 million in 2013. A further increase was noted in 2015, where liabilities reached their highest level of the five-year period at US$ 12,885 million.
- Current Ratio Interpretation
- The current ratio improved from 1.12 in 2011 to a peak of 1.46 in 2013, signaling an enhanced capacity to meet short-term obligations. This trend reversed in 2014 and 2015, with the ratio falling to 1.17. This decline is attributed to the convergence of decreasing current assets and increasing current liabilities toward the end of the analyzed timeframe.
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Quick Ratio
EMC Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 6,549) | 6,343) | 7,891) | 4,754) | 4,531) | |
| Short-term investments | 2,726) | 1,978) | 2,773) | 1,413) | 1,787) | |
| Accounts and notes receivable, less allowance for doubtful accounts | 3,977) | 4,413) | 3,861) | 3,433) | 2,937) | |
| Total quick assets | 13,252) | 12,734) | 14,525) | 9,601) | 9,256) | |
| Current liabilities | 12,885) | 11,710) | 11,799) | 10,304) | 10,376) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.03 | 1.09 | 1.23 | 0.93 | 0.89 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 13,252 ÷ 12,885 = 1.03
2 Click competitor name to see calculations.
The analysis of liquidity metrics from 2011 to 2015 reveals a period of strengthening and subsequent stabilization of the organization's immediate payment capacity.
- Quick Ratio Trend
- The quick ratio exhibited a progressive increase from 0.89 in 2011 to a peak of 1.23 in 2013. This improvement indicates an enhanced ability to meet short-term obligations using only the most liquid assets. Following the 2013 peak, the ratio experienced a gradual decline, settling at 1.03 by December 31, 2015.
- Asset and Liability Correlation
- The spike in the quick ratio during 2013 is primarily attributed to a substantial increase in total quick assets, which rose to US$ 14,525 million from US$ 9,601 million in the prior year. While current liabilities also increased over the five-year period—growing from US$ 10,376 million in 2011 to US$ 12,885 million in 2015—the growth in quick assets during the mid-period outpaced the growth of liabilities.
- Liquidity Position Assessment
- A critical threshold was crossed between 2012 and 2013, as the ratio moved from 0.93 to 1.23. For the final three years of the period analyzed, the ratio remained above 1.0, suggesting that the organization maintained sufficient liquid assets to cover its current liabilities without relying on the sale of inventory.
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Cash Ratio
EMC Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 6,549) | 6,343) | 7,891) | 4,754) | 4,531) | |
| Short-term investments | 2,726) | 1,978) | 2,773) | 1,413) | 1,787) | |
| Total cash assets | 9,275) | 8,321) | 10,664) | 6,167) | 6,318) | |
| Current liabilities | 12,885) | 11,710) | 11,799) | 10,304) | 10,376) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.72 | 0.71 | 0.90 | 0.60 | 0.61 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 9,275 ÷ 12,885 = 0.72
2 Click competitor name to see calculations.
The liquidity position of the entity between 2011 and 2015 was characterized by fluctuations in cash reserves against a backdrop of steadily increasing short-term obligations. The cash ratio remained below 1.0 throughout the entire period, indicating that cash assets alone were insufficient to cover total current liabilities at any single point in time.
- Cash Asset Trends
- Total cash assets demonstrated significant volatility, beginning at 6,318 million USD in 2011 and experiencing a sharp increase to a peak of 10,664 million USD in 2013. Following this peak, cash levels declined to 8,321 million USD in 2014 before recovering slightly to 9,275 million USD by the end of 2015.
- Current Liabilities Progression
- Current liabilities exhibited a consistent upward trend over the five-year horizon. Obligations grew from 10,376 million USD in 2011 to 12,885 million USD in 2015, representing a steady increase in the company's short-term financial commitments.
- Cash Ratio Analysis
- The cash ratio remained nearly stagnant between 2011 and 2012, moving from 0.61 to 0.60. A substantial improvement was observed in 2013, where the ratio reached 0.90, driven by the surge in total cash assets. In the subsequent two years, the ratio retreated and stabilized, recording 0.71 in 2014 and 0.72 in 2015, suggesting a moderated liquidity profile compared to the 2013 peak.
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