Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
Illinois Tool Works Inc., liquidity ratios
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
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).
- Current Ratio
- The current ratio exhibited fluctuations over the analyzed periods. Starting from a relatively high level of 2.38 at the end of 2017, it decreased to 1.63 in 2018, then increased significantly to reach a peak of 2.9 in 2019. This was followed by a slight decline to 2.52 in 2020 and a further decrease to 1.84 in 2021. Overall, the ratio shows variability, indicating changes in the company’s ability to cover short-term liabilities with current assets.
- Quick Ratio
- The quick ratio followed a somewhat similar pattern to the current ratio but with a more pronounced drop in 2018. It started at 1.87 in 2017, dropped to 1.16 in 2018, then increased to 2.06 in 2019. Afterward, it decreased to 1.96 in 2020 and further declined to 1.26 in 2021. The changes suggest fluctuating levels of liquid assets relative to current liabilities, with a notable decrease in liquidity in the most recent year.
- Cash Ratio
- The cash ratio exhibited the most volatility among the three liquidity measures. It began at 1.01 in 2017, dropped sharply to 0.42 in 2018, then recovered to 0.92 in 2019 and remained relatively stable at 0.99 in 2020. However, it declined again to 0.44 in 2021. This indicates considerable changes in the company's cash reserves relative to current liabilities, with a notable reduction in immediate liquidity in the last reported year.
- Summary
- Liquidity ratios exhibited significant variability over the five-year period. Following declines in 2018 across all ratios, there was a recovery in 2019 and 2020 before another decline in 2021. This pattern may reflect changes in operational cash flow, working capital management, or strategic shifts in the cushion of liquid assets held by the company. Despite fluctuations, the ratios generally remained above 1.0 in most years for current and quick ratios, indicating maintained capability to cover current liabilities, though cash ratio levels suggest more conservative immediate liquidity in some years.
Current Ratio
Illinois Tool Works Inc., 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 millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Current Ratio, Sector | ||||||
| Capital Goods | ||||||
| Current Ratio, Industry | ||||||
| Industrials | ||||||
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
= ÷ =
2 Click competitor name to see calculations.
- Current Assets
- Current assets exhibited a decline from 7,278 million US dollars at the end of 2017 to 5,778 million US dollars in 2018. This was followed by a recovery trend, reaching 6,253 million US dollars in 2019 and further increasing to 6,523 million US dollars in 2020. In 2021, there was a slight decrease to 6,374 million US dollars. Overall, despite fluctuations, current assets maintained a higher level in the latter years compared to 2018.
- Current Liabilities
- Current liabilities increased moderately from 3,053 million US dollars in 2017 to 3,542 million US dollars in 2018. There was a significant reduction in 2019, dropping to 2,154 million US dollars, followed by a gradual increase to 2,589 million US dollars in 2020 and a sharper rise to 3,470 million US dollars in 2021. The liabilities in 2021 nearly approached the initial level of 2017, indicating a volatile pattern.
- Current Ratio
- The current ratio demonstrated considerable variation over the period. It started high at 2.38 in 2017, dropped substantially to 1.63 in 2018, and then surged to 2.9 in 2019, marking the highest value in the period. This was followed by a decrease to 2.52 in 2020 and a further fall to 1.84 in 2021. The ratio trends reflect the movements in both current assets and current liabilities, showing a peak in liquidity in 2019 and a weakening position in the final year of data.
- Summary
- The data reveals fluctuations in liquidity and short-term financial stability over the five-year period. After a dip in 2018, both assets and liabilities showed improvement and managed some recovery by 2019 and 2020. However, in 2021, an increase in liabilities and a slight decrease in assets contributed to a reduced current ratio, indicating decreased liquidity compared to the prior two years. This suggests varying management of working capital components and potential sensitivity to external or internal factors affecting short-term obligations and asset levels.
Quick Ratio
Illinois Tool Works Inc., 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 millions) | ||||||
| Cash and equivalents | ||||||
| Trade receivables | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Quick Ratio, Sector | ||||||
| Capital Goods | ||||||
| Quick Ratio, Industry | ||||||
| Industrials | ||||||
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 Click competitor name to see calculations.
- Quick Assets Trend
- The total quick assets display fluctuations over the five-year period. There is a significant decrease from 5,722 million US dollars in 2017 to 4,126 million in 2018. Afterwards, the value climbs to 4,442 million in 2019 and further increases to 5,070 million in 2020. However, in 2021, the total quick assets again decline to 4,367 million US dollars. Overall, the amount does not show a consistent upward or downward trajectory but rather a pattern of decline, recovery, and decline.
- Current Liabilities Trend
- Current liabilities present a varying trend over the same period. The liabilities escalate from 3,053 million US dollars in 2017 to 3,542 million in 2018, demonstrating an increase in short-term obligations. This is followed by a sharp decline to 2,154 million in 2019, suggesting a reduction in current obligations. The values then rise to 2,589 million in 2020 and further increase to 3,470 million US dollars in 2021, showing a rebound in current liabilities. The overall pattern suggests management of liabilities with periods of both buildup and reduction.
- Quick Ratio Analysis
- The quick ratio varies considerably over the years, indicating changes in liquidity. In 2017, the ratio is relatively strong at 1.87, signifying substantial liquid assets relative to current liabilities. It decreases significantly to 1.16 in 2018, showing a drop in liquidity. In 2019, it surges to 2.06, implying an improvement and a higher capacity to cover short-term obligations without selling inventory. The ratio dips slightly to 1.96 in 2020 but remains robust. However, in 2021, it falls again to 1.26, signalling reduced liquidity compared to previous years yet still above 1, which generally indicates adequate coverage of current liabilities through quick assets.
- Overall Insights
- The data suggests the company experienced volatility in liquidity and working capital components. Quick assets and current liabilities moved in divergent directions during some periods, affecting the quick ratio. The sharp decline in quick assets and current liabilities in 2019 brought about an improvement in liquidity ratios. However, the subsequent years show weaker liquidity positions with quick ratios decreasing in 2018 and 2021 in particular. These patterns could reflect changing operational or financial strategies, potential fluctuations in cash management, or short-term financing approaches.
Cash Ratio
Illinois Tool Works Inc., 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 millions) | ||||||
| Cash and equivalents | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Cash Ratio, Sector | ||||||
| Capital Goods | ||||||
| Cash Ratio, Industry | ||||||
| Industrials | ||||||
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
= ÷ =
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets experienced fluctuations over the five-year period. Initially, the cash assets were relatively high at 3,094 million USD in 2017, then sharply declined to 1,504 million USD in 2018. A moderate recovery followed in 2019 and 2020, reaching 1,981 million USD and 2,564 million USD respectively. However, the cash assets decreased again to 1,527 million USD in 2021, indicating variability and lack of consistent growth in cash holdings.
- Current liabilities
- Current liabilities exhibited variability but generally remained within a range of approximately 2,150 million to 3,550 million USD. The liabilities peaked in 2018 at 3,542 million USD and again in 2021 at 3,470 million USD. The lowest point was recorded in 2019 at 2,154 million USD. Overall, liabilities saw some reductions in the middle years but rebounded towards the end of the period, indicating fluctuations in short-term obligations.
- Cash ratio
- The cash ratio followed a pattern similar to the total cash assets, reflecting the company's liquidity position. It stood at 1.01 in 2017, indicating a liquidity level capable of fully covering current liabilities with cash alone. The ratio then dropped significantly to 0.42 in 2018, suggesting reduced liquidity. A recovery occurred in 2019 and 2020 with ratios of 0.92 and 0.99 respectively, nearly restoring the strong liquidity status. In 2021, it decreased back to 0.44, signifying a weakening in liquidity relative to current liabilities. These fluctuations suggest the company's cash reserves relative to short-term obligations varied notably, with more constrained liquid assets in 2018 and 2021.