HP Inc. (NYSE:HPQ)

The analysis of liquidity ratios over the examined periods reveals notable fluctuations and a general declining trend in the company's short-term financial health.

Current Ratio

The current ratio remained relatively stable and above 1.0 from early 2013 through 2015, peaking at 1.23 in October 2015. Starting in 2016, it consistently fell below 1.0, reaching a low of 0.78 in January 2019. This downward trend indicates a diminishing capacity to cover current liabilities with current assets, suggesting potential liquidity concerns emerging in recent periods.

Quick Ratio

The quick ratio followed a similar pattern to the current ratio but showed generally lower values, consistent with its exclusion of inventory from assets. It oscillated around 0.7 to 0.75 from 2013 to 2014 and peaked slightly in October 2015 at 0.8. After that point, it declined steadily, reaching lows near 0.35 by early 2019. This decline emphasizes a reduction in highly liquid assets available to meet short-term obligations promptly.

Cash Ratio

The cash ratio was the lowest among the three measures throughout the timeframe, reflecting the company's most liquid resource measure. It showed moderate fluctuations, rising from approximately 0.27 in early 2013 to about 0.41 by the end of 2015. Post-2015, a marked decline is observable, with the ratio dropping to as low as 0.14 by January 2019. This points to a significant contraction in cash and cash equivalents relative to current liabilities, intensifying liquidity risk.

Overall, the financial data indicates that while liquidity ratios were relatively comfortable through 2015, a persistent decline ensued from 2016 onward. This suggests that the company's ability to meet short-term obligations with readily available assets has progressively weakened, warranting attention to working capital management and potential impacts on financial flexibility.

The analysis of the quarterly financial data over the period spanning from January 31, 2013, to July 31, 2019, reveals several important trends concerning current assets, current liabilities, and the current ratio.

Current Assets

Current assets have exhibited varying trends over the observed period. Initially, the values remained relatively stable around the 49,000 to 50,000 million US dollars range from early 2013 through late 2015. However, there is a noticeable abrupt decrease starting in early 2016, with current assets dropping to approximately 15,000 million US dollars. Following this drop, a gradual recovery is evident as the assets slowly increased and fluctuated between roughly 17,000 and 22,000 million US dollars through 2017 and 2018. The trend toward the second quarter of 2019 shows a slight downward movement, ending near 19,000 million US dollars, which is substantially lower than the 2013-2015 period levels.

Current Liabilities

Current liabilities show a correspondingly complex pattern. From 2013 through 2015, liabilities varied primarily between approximately 43,000 and 49,000 million US dollars, following a largely horizontal trend with moderate fluctuations. A marked decrease appears in early 2016, with liabilities dropping to near 16,700 million US dollars. Subsequently, liabilities generally rose through 2017 and 2018, reaching a peak near 25,500 million US dollars in early 2019 before a slight decline in mid-2019. This indicates increased short-term obligations during the latter years compared to the mid-2010s.

Current Ratio

The current ratio reflects the liquidity position and ability to cover short-term obligations. From 2013 to the end of 2015, the current ratio hovered slightly above 1, generally ranging from 1.06 to 1.23, indicating modest liquidity coverage. However, there is a distinct shift in 2016 where the ratio dropped below 1, reaching as low as 0.78 by early 2019. This signifies that the company, in those periods, had current liabilities exceeding current assets, indicating a tighter liquidity position. Although some minor fluctuations occur, the current ratio remains predominantly below 1 in the last few years of the dataset.

In summary, the data reveals a significant structural change around 2016, with current assets and liabilities both markedly reduced from the prior levels. The post-2016 period demonstrates a tighter liquidity situation as the current ratio remains below 1, potentially highlighting increased liquidity risk or changes in working capital management. The upward trend in current liabilities towards 2019, combined with the subdued growth in current assets, might suggest a need for improved asset management or financing strategies to reinforce short-term financial stability.

Trend in Total Quick Assets

Total quick assets exhibited moderate fluctuations over the observed periods. Initially, from January 2013 to October 2014, quick assets gradually increased from approximately 30.1 billion US dollars to around 31.9 billion US dollars, reflecting a relatively stable liquidity position. This was followed by a notable decline in the first quarter of 2016, with quick assets dropping sharply to about 7.8 billion US dollars. Subsequently, there was a recovery and steady growth through late 2016 and 2017, reaching peaks over 11.4 billion US dollars in October 2017. However, in 2018 and 2019, quick assets demonstrated volatility, with values oscillating between 8.5 billion and 10.8 billion US dollars. The initial high levels in early 2013 and 2014 contrast markedly with the lower and more variable figures in later years, indicating shifts in liquidity management or asset composition.

Trend in Current Liabilities

Current liabilities showed a generally downward trend from 44.4 billion US dollars in January 2013 to approximately 42.2 billion US dollars by October 2015. A significant decrease is observed in early 2016, where current liabilities dropped substantially to about 16.8 billion US dollars. After this sharp decline, liabilities increased again, fluctuating mostly in the range of 18.5 billion to 25.5 billion US dollars from 2016 through 2019. The early part of the time series reflects relatively stable liabilities, whereas the middle and later periods suggest adjustments in short-term obligations or restructuring activities affecting the company's current liabilities profile.

Quick Ratio Analysis

The quick ratio initially remained relatively stable and consistent, ranging between 0.67 and 0.75 from 2013 to the end of 2014. This stability indicates a balanced short-term liquidity position during that period. In the first quarter of 2016, the quick ratio sharply declined to around 0.47 and continued a downward trajectory, reaching its lowest point at 0.35 in January 2019. The ratio mostly hovered between 0.35 and 0.55 from 2016 onward, signifying a weakening liquidity position relative to current liabilities. The persistent decline in the quick ratio despite fluctuations in quick assets and current liabilities suggests that liabilities may have increased at a faster rate or quick assets have become less adequate to cover short-term obligations over the more recent years analyzed.

Overall Insights

The data reveals a period of relative stability in liquidity and liabilities in the early years, followed by a significant structural change in 2016 where both quick assets and current liabilities experienced sharp shifts. Post-2016, the company appears to manage more volatile liquidity levels and an overall weaker quick ratio, implying increased pressure on short-term financial health. This pattern may warrant further investigation into the underlying reasons, such as operational changes, financing activities, or market conditions affecting the company's working capital management and quick asset composition.

Cash Assets Trend

Total cash assets fluctuated significantly over the analyzed period. Initially, values ranged around 12,000 to 16,000 million US dollars from early 2013 through early 2015, with a peak near 17,000 million in mid-2015. From 2016 onwards, there was a marked decline, with cash assets dropping sharply to below 6,000 million in early 2016. Subsequently, a gradual recovery occurred, reaching approximately 7,000 million by late 2017, followed by another decline to as low as approximately 3,300 million by early 2019, before a minor increase toward mid-2019.

Current Liabilities Movement

Current liabilities demonstrated relative stability around the 40,000 to 46,000 million US dollar range during 2013 to 2015, with some variations but no clear directional trend. Beginning in 2016, there was a significant reduction in liabilities, roughly halving to approximately 17,000 to 18,000 million from early to late 2016. However, from the start of 2017, current liabilities exhibited an increasing trajectory, consistently rising to a peak above 25,000 million by early 2019, marking an increasing obligation level toward the end of the period.

Cash Ratio Analysis

The cash ratio showed moderate variability during the early years, ranging mostly between 0.27 and 0.37 from 2013 to 2015, indicating a stable but moderate liquidity position relative to current liabilities. In 2016, this ratio experienced a decrease down to around 0.22 but then improved slightly to about 0.33 by late 2016 and early 2017. From 2017 onward, a downward trend emerged with the ratio dropping steadily to a low near 0.14 by early 2019, suggesting a weakening liquidity position in relation to current liabilities in the later periods.

Overall Insights

The financial data reveals a period of considerable volatility in cash assets and a significant restructuring of current liabilities. The substantial drop and subsequent partial recovery in cash assets during 2016 may indicate operational or strategic changes impacting liquidity. Meanwhile, the doubling of current liabilities from mid-2016 to early 2019 points to increased short-term obligations or financing changes. The declining cash ratio toward the end of the period highlights a growing liquidity risk, as cash reserves have decreased relative to current liabilities. Such patterns suggest increasing pressure on short-term financial stability in the most recent years analyzed.