HP Inc. (NYSE:HPQ)

An analysis of the liquidity position from 2013 to 2018 reveals a consistent pattern of initial improvement followed by a steady deterioration across all primary liquidity metrics. A peak in short-term solvency was reached in 2015, after which a downward trend persisted through 2018, suggesting a tightening of the company's ability to meet short-term obligations.

Current Ratio

The current ratio exhibited an upward trajectory between 2013 and 2015, rising from 1.11 to a peak of 1.23. However, a significant decline occurred thereafter, with the ratio falling below the critical threshold of 1.00 in 2016 (0.98) and reaching a period low of 0.85 by 2018. This indicates that by the end of the period, current liabilities exceeded current assets.

Quick Ratio

The quick ratio followed a similar trajectory to the current ratio, increasing from 0.69 in 2013 to 0.80 in 2015. A sharp contraction is observed starting in 2016, with the ratio dropping to 0.55 and continuing to decline to 0.41 by 2018. The widening gap between the current and quick ratios suggests an increasing reliance on inventory to cover short-term liabilities.

Cash Ratio

The cash ratio improved from 0.27 in 2013 to a high of 0.41 in 2015. This was followed by a consistent decrease over the subsequent three years, ending at 0.21 in 2018. This decline reflects a reduction in the most liquid assets available to cover immediate current liabilities.

The convergence of these trends indicates a systematic reduction in liquidity margins. The transition from a position of surplus current assets in 2015 to a deficit in 2018 suggests a shift in the working capital structure or a change in the management of short-term financing.

The liquidity profile between 2013 and 2018 is characterized by an initial period of strengthening followed by a significant structural reduction in balance sheet size and a subsequent decline in the short-term solvency margin.

Initial Liquidity Expansion (2013–2015)

During the first three years of the period, the current ratio demonstrated a consistent upward trend, increasing from 1.11 to 1.23. This improvement was driven by the maintenance of current assets at approximately 50,000 to 51,000 million US$, paired with a steady decrease in current liabilities from 45,521 million US$ to 42,191 million US$.

Balance Sheet Contraction (2016)

A substantial shift occurred in 2016, marked by a sharp decline in both current assets and current liabilities. Current assets fell from 51,787 million US$ to 18,468 million US$, while current liabilities dropped from 42,191 million US$ to 18,808 million US$. This contraction resulted in the current ratio falling below the 1.0 threshold to 0.98, indicating that short-term obligations began to exceed available liquid assets.

Recent Solvency Trend (2017–2018)

Following the 2016 contraction, the current ratio exhibited further volatility and an overall downward trajectory. Although the ratio returned to 1.00 in 2017, it declined to 0.85 by October 31, 2018. This deterioration is attributable to a growth in current liabilities, which rose to 25,131 million US$ by 2018, while current assets failed to keep pace, ending the period at 21,387 million US$.

The liquidity position of the organization experienced two distinct phases between 2013 and 2018, characterized by an initial period of marginal improvement followed by a significant structural contraction and a subsequent steady decline in the ability to cover short-term obligations.

Quick Asset Trends

Total quick assets demonstrated a steady increase from US$ 31,183 million in 2013 to a peak of US$ 33,714 million in 2015. A sharp contraction occurred in 2016, with assets falling to US$ 10,402 million. This reduced asset base remained relatively stagnant through 2018, closing the period at US$ 10,279 million.

Current Liabilities Trajectory

Current liabilities saw a gradual decline from 2013 to 2015, moving from US$ 45,521 million to US$ 42,191 million. A substantial reduction was observed in 2016, where liabilities dropped to US$ 18,808 million. Following this trough, liabilities entered a consistent upward trend, increasing to US$ 25,131 million by October 31, 2018.

Quick Ratio Analysis

The quick ratio initially improved from 0.69 in 2013 to 0.80 in 2015, indicating a strengthening liquidity posture. A significant reversal occurred in 2016, with the ratio dropping to 0.55. The downward trajectory continued through 2017 and 2018, reaching a period low of 0.41. This progression indicates a diminishing capacity to meet immediate financial obligations using only the most liquid assets, as the ratio remained consistently below the 1.0 threshold throughout the analyzed period and deteriorated further in the final three years.

The liquidity position between 2013 and 2018 is characterized by an initial period of improvement followed by a significant structural shift and a subsequent decline in the ability to cover short-term obligations with cash assets.

Total Cash Assets

A growth phase is evident from 2013 to 2015, with cash assets increasing from 12,163 million to a peak of 17,433 million. This was followed by a sharp contraction in 2016, where assets fell to 6,288 million. Although a slight recovery occurred in 2017, assets declined again to 5,166 million by the end of 2018.

Current Liabilities

Current liabilities remained relatively stable from 2013 to 2015, moving from 45,521 million to 42,191 million. A substantial decrease occurred in 2016, with liabilities dropping to 18,808 million. Following this low point, a steady upward trend was observed through 2018, with liabilities rising to 25,131 million.

Cash Ratio Analysis

The cash ratio improved steadily from 0.27 in 2013 to a peak of 0.41 in 2015, indicating an enhanced immediate liquidity position. From 2016 onward, a consistent downward trend is observed, with the ratio falling from 0.33 to 0.21 by 2018. This decline is driven by the combination of decreasing cash reserves and increasing current liabilities in the final two years of the period.