Ecolab Inc. (NYSE:ECL)

Current ratio

The current ratio exhibits an overall upward trend from March 2017 through December 2021 until the final quarter, beginning at 1.02 and reaching a peak of 1.91 in June 2021. After peaking, the ratio decreases to 1.32 by December 2021. This indicates a strengthening in the company's ability to meet short-term liabilities with current assets over the majority of the observed period, followed by a notable decline in the last quarter.

Quick ratio

The quick ratio also shows a generally increasing trend over the timeframe, starting near 0.61 in early 2017 and climbing to a high of 1.30 in September 2021. Similar to the current ratio, there is a decrease afterward, dropping to 0.80 by December 2021. The ratio improvement suggests enhanced liquidity excluding inventories, demonstrating a stronger position to cover current liabilities with more liquid assets. The subsequent drop indicates a reduction in this more conservative liquidity measure late in the period.

Cash ratio

The cash ratio remains relatively low and stable, fluctuating between 0.01 and 0.06 from 2017 through 2019, indicating minimal cash and cash equivalents coverage of current liabilities. Starting in March 2020, there is a significant increase to 0.39 and subsequent peaks reaching 0.49 by June 2021, showing a marked improvement in cash holdings relative to current liabilities. However, this upward momentum reverses sharply at the end of the period, with the cash ratio dropping significantly to 0.10 by December 2021.

Overall observations

Liquidity ratios demonstrate a positive trajectory over several years, suggesting improved short-term financial stability and stronger liquidity positions, particularly evident from early 2020 through mid-2021. These improvements are likely reflective of changes in asset management, cash conservation, or liability management. Nevertheless, the pronounced decrease in all three ratios in the final quarter signals a potential shift in liquidity conditions, warranting further investigation into underlying causes such as increased liabilities, depletion of liquid assets, or operational changes during that period.

The analysis of the quarterly financial data reveals significant fluctuations and overall trends in the company's current assets, current liabilities, and current ratio from March 31, 2017, through December 31, 2021.

Current Assets

Current assets showed a gradual increase from approximately 4,307,300 thousand US dollars in March 2017 to a peak of about 6,437,100 thousand US dollars in March 2020. This peak was followed by a decline to around 4,687,100 thousand US dollars by December 2021. The pattern suggests a strong asset base initially growing steadily but facing a significant reduction after early 2020. This drop may indicate either asset sales, operational challenges, or rebalancing of asset structure in the subsequent quarters.

Current Liabilities

Current liabilities generally fluctuated between approximately 3,431,800 thousand US dollars and 4,257,400 thousand US dollars during the observed period. Initially, liabilities decreased from about 4,205,300 thousand US dollars in March 2017 to a low near 2,932,200 thousand US dollars in December 2020, indicating improved short-term obligation management or reduction in payable accounts. However, liabilities increased again toward the end of the period, reaching about 3,553,200 thousand US dollars by December 2021, which may signal increased borrowing or accrued expenses in the latest quarters.

Current Ratio

The current ratio showed improvement and volatility over the periods. Starting just above 1.0 at 1.02 in March 2017, it reached a high point at 1.91 in June 2021, indicating enhanced liquidity and better coverage of current liabilities by current assets. The ratio stabilized somewhat afterward, ending at 1.32 in December 2021. The elevated ratios from early 2020 through mid-2021 suggest stronger liquidity positions, potentially from increased asset holdings or reduced liabilities during that time, followed by a moderation toward the end of 2021.

In summary, while current assets grew considerably until early 2020 before declining, current liabilities followed an inverse pattern with a general decline until late 2020 and a slight recovery afterward. The current ratio reflects these dynamics with an overall upward trend indicating improved short-term financial health until mid-2021, followed by a reduction, which suggests caution for liquidity in the latest quarter reported.

Total Quick Assets

Total quick assets exhibited moderate fluctuations over the analyzed periods. From March 2017 to December 2017, the values generally increased from approximately 2,570,100 to 2,785,500 thousand US dollars. A slight decline followed in the first two quarters of 2018, though values recovered by the third quarter of 2018 to nearly 2,856,300 thousand US dollars. By 2019, the figures maintained relative stability, hovering around 2,770,600 to 2,982,900 thousand USD, before experiencing a substantial increase in the first quarter of 2020, peaking at 4,517,800 thousand. Thereafter, total quick assets decreased but remained elevated compared to earlier years, fluctuating between 3,353,400 and 3,733,400 thousand USD through 2021, ending near 2,838,300 thousand at the end of 2021.

Current Liabilities

Current liabilities demonstrated considerable variation throughout the time frame. Initially, values increased from 4,205,300 thousand USD at March 2017 to a peak of 4,318,400 thousand in June 2017, followed by a significant decline to 3,431,800 thousand by December 2017. The period from 2018 to early 2019 was marked by cyclical increases and decreases, with current liabilities rising again to above 4,150,000 thousand USD by March 2019 and then trending downward through December 2019. In 2020, there was a notable decline in current liabilities, dropping to approximately 2,932,200 thousand USD by the end of the year. This lower level was generally maintained during 2021 with modest fluctuations, before rising appreciably to 3,553,200 thousand as of December 2021.

Quick Ratio

The quick ratio indicates trends in liquidity and short-term financial health. Between March 2017 and December 2017, the ratio improved steadily from 0.61 to 0.81, reflecting stronger immediate liquidity. The ratio then fluctuated around 0.7 to 0.8 through 2018 and 2019, suggesting moderate liquidity. A sharp increase occurred in the first quarter of 2020, where the quick ratio rose to 1.06 and continued to improve through 2020, peaking at 1.21 in December 2020 and further increasing to 1.30 by mid-2021. This pattern reveals enhanced liquidity and stronger capacity to meet short-term obligations without relying on inventory. Toward the end of 2021, the ratio decreased to 0.80, indicating a moderation in liquidity after a period of elevated levels.

Total cash assets

The total cash assets exhibit considerable volatility throughout the examined periods. Initially, the values fluctuate between approximately 175,500 and 260,700 thousand US dollars during 2017 and early 2018. A notable decline occurs in the first half of 2018, followed by a recovery toward the end of 2018 and into 2019, with values reaching as high as 186,400 thousand US dollars by the end of 2019.

Starting in the first quarter of 2020, there is a pronounced and sharp increase in cash assets, peaking at 1,661,900 thousand US dollars, which represents a substantial increase compared to prior quarters. Following this peak, the cash assets decrease over subsequent quarters through 2021 but remain significantly higher than levels observed before 2020, indicating a strategic accumulation or retention of cash during this period.

Current liabilities

Current liabilities show a fluctuating pattern within the range of approximately 3,200,000 to 4,300,000 thousand US dollars over the entire period. The values indicate a downward trend from early 2017 through 2020, reaching the lowest points between late 2019 and early 2021. However, in the last quarter of 2021, current liabilities rise sharply to 3,553,200 thousand US dollars, suggesting increased short-term obligations towards the end of the period.

Cash ratio

The cash ratio remains relatively low and stable in the initial periods, fluctuating between 0.01 and 0.06 from 2017 through early 2020, indicating limited immediate liquidity relative to current liabilities. A significant and sudden increase occurs starting in the first quarter of 2020, with the ratio jumping to above 0.30 and peaking near 0.49 by mid-2021. This marks a substantial improvement in liquidity, reflecting the corresponding surge in cash assets during this time.

Following the peak, the cash ratio declines somewhat by the end of 2021 to 0.10, suggesting a partial normalization but still maintaining higher liquidity levels than observed prior to 2020.