Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Edwards Lifesciences Corp., liquidity ratios
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Current ratio | 3.08 | 3.46 | 3.31 | 2.61 | 1.80 | |
| Quick ratio | 2.07 | 2.24 | 2.34 | 1.70 | 1.28 | |
| Cash ratio | 1.42 | 1.57 | 1.68 | 1.09 | 0.95 |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The liquidity position of the organization demonstrated a significant upward trajectory between 2017 and 2020, followed by a slight moderation in 2021. Across all three measured metrics, there is a consistent pattern of strengthening short-term solvency and a robust capacity to meet immediate obligations.
- Current Ratio
- A strong growth trend is observed from 2017 to 2020, with the ratio rising from 1.80 to a peak of 3.46. A marginal decline occurred in 2021, closing at 3.08, which indicates a substantial cushion of current assets relative to current liabilities.
- Quick Ratio
- This metric showed a steady increase from 1.28 in 2017 to a peak of 2.34 in 2019. Subsequent years saw a gradual decrease to 2.24 in 2020 and 2.07 in 2021, suggesting a high level of liquidity even when excluding inventory from the calculation.
- Cash Ratio
- The cash ratio improved from 0.95 in 2017 to a peak of 1.68 in 2019. A gradual downward trend followed in 2020 and 2021, ending at 1.42. The fact that this ratio remained above 1.0 for the majority of the period indicates that cash and cash equivalents alone were sufficient to cover all current liabilities.
Overall, the analysis reveals a period of liquidity accumulation peaking around 2019 and 2020. While a slight contraction in these ratios is evident in the final two years, the company maintains a conservative and highly liquid financial posture, well above standard industry thresholds for solvency.
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Current Ratio
Edwards Lifesciences Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 3,180,700) | 3,091,000) | 2,984,000) | 2,286,900) | 2,532,100) | |
| Current liabilities | 1,032,300) | 893,900) | 902,400) | 876,600) | 1,402,900) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 3.08 | 3.46 | 3.31 | 2.61 | 1.80 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Abbott Laboratories | 1.85 | — | — | — | — | |
| Elevance Health Inc. | 1.47 | — | — | — | — | |
| Intuitive Surgical Inc. | 5.08 | — | — | — | — | |
| Medtronic PLC | 2.65 | — | — | — | — | |
| UnitedHealth Group Inc. | 0.79 | — | — | — | — | |
| Current Ratio, Sector | ||||||
| Health Care Equipment & Services | 1.22 | — | — | — | — | |
| Current Ratio, Industry | ||||||
| Health Care | 1.31 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Current ratio = Current assets ÷ Current liabilities
= 3,180,700 ÷ 1,032,300 = 3.08
2 Click competitor name to see calculations.
The liquidity position exhibited a significant strengthening trend between 2017 and 2020, followed by a slight moderation in 2021. The overall trajectory indicates a substantial increase in the capacity to meet short-term obligations using current assets.
- Current Asset Trajectory
- Current assets demonstrated a general upward trend, increasing from 2,532,100 thousand US$ in 2017 to 3,180,700 thousand US$ by 2021. Following a brief decline in 2018 to 2,286,900 thousand US$, assets grew consistently over the subsequent three years, expanding the available liquidity pool.
- Current Liability Management
- A significant reduction in current liabilities was observed between 2017 and 2018, with obligations falling from 1,402,900 thousand US$ to 876,600 thousand US$. This level remained relatively stable through 2020 before an upward adjustment to 1,032,300 thousand US$ was recorded in 2021.
- Current Ratio Analysis
- The current ratio improved markedly from 1.80 in 2017 to a peak of 3.46 in 2020. This expansion was driven by the simultaneous growth of current assets and the reduction of current liabilities. In 2021, the ratio moderated to 3.08, reflecting the increase in current liabilities during that period, while still maintaining a strong solvency margin compared to the 2017 baseline.
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Quick Ratio
Edwards Lifesciences Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 862,800) | 1,183,200) | 1,179,100) | 714,100) | 818,300) | |
| Short-term investments | 604,000) | 219,400) | 337,800) | 242,400) | 519,200) | |
| Accounts receivable, net of allowances | 582,200) | 514,600) | 543,600) | 456,900) | 421,600) | |
| Other receivables | 82,700) | 88,200) | 55,500) | 80,400) | 40,600) | |
| Total quick assets | 2,131,700) | 2,005,400) | 2,116,000) | 1,493,800) | 1,799,700) | |
| Current liabilities | 1,032,300) | 893,900) | 902,400) | 876,600) | 1,402,900) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 2.07 | 2.24 | 2.34 | 1.70 | 1.28 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Abbott Laboratories | 1.28 | — | — | — | — | |
| Elevance Health Inc. | 1.33 | — | — | — | — | |
| Intuitive Surgical Inc. | 4.34 | — | — | — | — | |
| Medtronic PLC | 1.91 | — | — | — | — | |
| UnitedHealth Group Inc. | 0.72 | — | — | — | — | |
| Quick Ratio, Sector | ||||||
| Health Care Equipment & Services | 1.04 | — | — | — | — | |
| Quick Ratio, Industry | ||||||
| Health Care | 1.00 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 2,131,700 ÷ 1,032,300 = 2.07
2 Click competitor name to see calculations.
The liquidity position from 2017 to 2021 reveals a general strengthening of the capacity to meet short-term obligations using the most liquid assets. The quick ratio transitioned from a baseline of 1.28 in 2017 to a peak of 2.34 in 2019, before settling at 2.07 by the end of 2021, indicating a sustained improvement in immediate solvency over the five-year period.
- Quick Ratio Progression
- An upward trend was observed between 2017 and 2019, during which the ratio increased from 1.28 to 2.34. This trajectory suggests a significant expansion of the liquidity cushion. Although a slight contraction occurred in 2020 and 2021, resulting in a final ratio of 2.07, the level remains substantially higher than the 2017 starting point, maintaining a strong ability to cover current liabilities without relying on the sale of inventory.
- Asset and Liability Dynamics
- The improvement in liquidity was driven by complementary movements in assets and liabilities. A notable reduction in current liabilities occurred between 2017 and 2018, decreasing from 1,402,900 thousand to 876,600 thousand. This was followed by a significant increase in total quick assets between 2018 and 2019, rising from 1,493,800 thousand to 2,116,000 thousand. The combination of lower obligations and higher liquid reserves drove the ratio to its peak in 2019.
- Recent Trends in Liquidity Components
- From 2019 to 2021, total quick assets remained relatively stable, fluctuating within the 2.0 billion to 2.1 billion range. However, a moderate increase in current liabilities to 1,032,300 thousand in 2021 contributed to the gradual decline of the quick ratio from 2.34 to 2.07. Despite this recent softening, the liquidity profile remains robust and well above the historical baseline.
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Cash Ratio
Edwards Lifesciences Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 862,800) | 1,183,200) | 1,179,100) | 714,100) | 818,300) | |
| Short-term investments | 604,000) | 219,400) | 337,800) | 242,400) | 519,200) | |
| Total cash assets | 1,466,800) | 1,402,600) | 1,516,900) | 956,500) | 1,337,500) | |
| Current liabilities | 1,032,300) | 893,900) | 902,400) | 876,600) | 1,402,900) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.42 | 1.57 | 1.68 | 1.09 | 0.95 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Abbott Laboratories | 0.78 | — | — | — | — | |
| Elevance Health Inc. | 0.95 | — | — | — | — | |
| Intuitive Surgical Inc. | 3.66 | — | — | — | — | |
| Medtronic PLC | 1.27 | — | — | — | — | |
| UnitedHealth Group Inc. | 0.36 | — | — | — | — | |
| Cash Ratio, Sector | ||||||
| Health Care Equipment & Services | 0.64 | — | — | — | — | |
| Cash Ratio, Industry | ||||||
| Health Care | 0.60 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 1,466,800 ÷ 1,032,300 = 1.42
2 Click competitor name to see calculations.
The liquidity position of the organization demonstrates a significant strengthening over the five-year period ending December 31, 2021. The transition from a cash ratio below 1.0 to a consistently higher threshold indicates an enhanced capacity to meet immediate short-term obligations using only the most liquid assets.
- Cash Ratio Evolution
- The cash ratio rose from 0.95 in 2017 to a peak of 1.68 in 2019, signaling a shift toward a more liquid financial posture. While the ratio experienced a moderate decline to 1.57 in 2020 and 1.42 in 2021, it remained well above the 1.0 benchmark, ensuring that current liabilities are fully covered by cash assets.
- Cash Asset Trends
- Total cash assets showed volatility, decreasing from 1.338 billion US dollars in 2017 to 956.5 million US dollars in 2018. A substantial recovery occurred in 2019, with assets reaching 1.517 billion US dollars. For the remainder of the period, cash levels stabilized, closing at 1.467 billion US dollars in 2021.
- Current Liabilities Analysis
- Current liabilities were reduced sharply between 2017 and 2018, falling from 1.403 billion US dollars to 876.6 million US dollars. This contraction in obligations contributed heavily to the improvement in liquidity ratios. Liabilities remained relatively stable through 2020 before increasing to 1.032 billion US dollars in 2021.
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