Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Kinder Morgan Inc., liquidity ratios
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Current ratio | 0.63 | 0.76 | 0.44 | 0.55 | 0.69 | |
| Quick ratio | 0.49 | 0.64 | 0.29 | 0.36 | 0.39 | |
| Cash ratio | 0.22 | 0.44 | 0.05 | 0.13 | 0.07 |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
- Current Ratio
- The current ratio exhibited a declining trend from 0.69 in 2015 to 0.44 in 2017, indicating a reduction in short-term liquidity during this period. However, the ratio improved significantly to 0.76 in 2018, suggesting enhanced ability to cover current liabilities with current assets. In 2019, the ratio slightly decreased to 0.63 but remained above the levels recorded from 2016 to 2017.
- Quick Ratio
- The quick ratio followed a similar pattern to the current ratio. It decreased steadily from 0.39 in 2015 to 0.29 in 2017, reflecting decreased liquid asset coverage of current liabilities excluding inventories. There was a notable improvement to 0.64 in 2018, indicating strengthened liquidity without relying on inventory. This ratio then declined to 0.49 in 2019, but it still maintained a better position compared to the period before 2018.
- Cash Ratio
- The cash ratio displayed considerable fluctuations over the years. Starting at a low point of 0.07 in 2015, it increased to 0.13 in 2016, then sharply dropped to 0.05 in 2017, indicating minimal cash and cash equivalents relative to current liabilities that year. The ratio surged to 0.44 in 2018, representing a substantial increase in cash liquidity. In 2019, it decreased to 0.22 but remained higher than all the years prior to 2018, signaling an overall improvement in cash reserves relative to short-term obligations.
- Overall Liquidity Analysis
- All three liquidity ratios generally declined from 2015 to 2017, indicating a period of weakening liquidity. The marked improvement across all ratios in 2018 points to a strategic shift or operational changes that enhanced the company's short-term financial stability. While the ratios fell somewhat in 2019 compared to 2018, they remained at healthier levels than the earlier years, suggesting a sustained albeit slightly reduced liquidity position.
Current Ratio
Kinder Morgan Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 3,238) | 5,722) | 2,715) | 3,229) | 2,824) | |
| Current liabilities | 5,100) | 7,557) | 6,181) | 5,924) | 4,065) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 0.63 | 0.76 | 0.44 | 0.55 | 0.69 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Current ratio = Current assets ÷ Current liabilities
= 3,238 ÷ 5,100 = 0.63
2 Click competitor name to see calculations.
- Current Assets
- The current assets exhibited fluctuations over the analyzed period. Initially, there was an increase from $2,824 million in 2015 to $3,229 million in 2016. This was followed by a decline to $2,715 million in 2017, then a notable rise to $5,722 million in 2018, before decreasing again to $3,238 million in 2019.
- Current Liabilities
- Current liabilities demonstrated a consistent upward trend from 2015 through 2018, increasing from $4,065 million to $7,557 million. However, in 2019, there was a significant reduction to $5,100 million.
- Current Ratio
- The current ratio, which measures short-term liquidity, generally remained below 1 across the five-year span, indicating that current liabilities exceeded current assets throughout. The ratio decreased from 0.69 in 2015 down to 0.44 in 2017, reaching its lowest point. It then improved to 0.76 in 2018, before declining again to 0.63 in 2019.
- Summary and Insights
- Overall, the company’s liquidity position experienced variability, with current assets and liabilities moving in somewhat divergent patterns. The persistent current ratio below 1 suggests challenges in covering short-term obligations solely with current assets. The peak in current assets and current ratio in 2018 might reflect a temporary strengthening of liquidity; however, the subsequent decline in 2019 indicates a potential return to tighter short-term financial conditions. The significant decrease in current liabilities in 2019 may have contributed to this improved liquidity, but the current ratio remains below a conservative benchmark of 1, highlighting ongoing liquidity risk considerations.
Quick Ratio
Kinder Morgan Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 185) | 3,280) | 264) | 684) | 229) | |
| Restricted deposits | 24) | 51) | 62) | 103) | 60) | |
| Marketable securities at fair value | 925) | —) | —) | —) | —) | |
| Accounts receivable, net | 1,370) | 1,498) | 1,448) | 1,370) | 1,315) | |
| Total quick assets | 2,504) | 4,829) | 1,774) | 2,157) | 1,604) | |
| Current liabilities | 5,100) | 7,557) | 6,181) | 5,924) | 4,065) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.49 | 0.64 | 0.29 | 0.36 | 0.39 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 2,504 ÷ 5,100 = 0.49
2 Click competitor name to see calculations.
- Total quick assets
- The total quick assets exhibited notable fluctuations over the five-year period. Starting at 1604 million US dollars in 2015, the amount increased to 2157 million in 2016, followed by a decrease to 1774 million in 2017. A significant surge occurred in 2018, raising the total to 4829 million, before declining again to 2504 million in 2019. This pattern suggests variability in the company's liquid assets, with a pronounced peak in 2018.
- Current liabilities
- Current liabilities showed a generally increasing trend from 2015 to 2018, rising from 4065 million US dollars in 2015 to a high of 7557 million in 2018. However, in 2019, liabilities decreased substantially to 5100 million. This indicates that the company experienced growing short-term obligations for most of the period but managed to reduce these liabilities significantly in the final year analyzed.
- Quick ratio
- The quick ratio mirrored the trends observed in quick assets and current liabilities. The ratio declined progressively from 0.39 in 2015 to a low of 0.29 in 2017, indicating weakening short-term liquidity during this timeframe. In 2018, the quick ratio improved markedly to 0.64, reflecting enhanced liquidity, largely attributed to the surge in quick assets and despite high current liabilities. In 2019, the ratio decreased to 0.49, signaling a reduction in liquidity compared to the previous year, but still higher than the levels seen from 2015 to 2017.
- Overall analysis
- The data reveals volatility in liquidity measures, with a significant improvement in 2018 driven by increased quick assets and the peak of current liabilities. The subsequent decrease in both quick assets and current liabilities in 2019 led to a moderate decline in liquidity ratios, yet the company's short-term financial position remained stronger than in earlier years. This suggests that while the company faced fluctuating financial conditions, it was able to enhance its liquidity substantially before partially reverting to lower levels.
Cash Ratio
Kinder Morgan Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 185) | 3,280) | 264) | 684) | 229) | |
| Restricted deposits | 24) | 51) | 62) | 103) | 60) | |
| Marketable securities at fair value | 925) | —) | —) | —) | —) | |
| Total cash assets | 1,134) | 3,331) | 326) | 787) | 289) | |
| Current liabilities | 5,100) | 7,557) | 6,181) | 5,924) | 4,065) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.22 | 0.44 | 0.05 | 0.13 | 0.07 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 1,134 ÷ 5,100 = 0.22
2 Click competitor name to see calculations.
- Total Cash Assets
- The total cash assets displayed an overall increasing trend from 2015 to 2019, with notable fluctuations. Starting at 289 million US dollars in 2015, cash assets rose marginally to 326 million in 2017, followed by a significant spike to 3,331 million in 2018 before declining to 1,134 million in 2019. This indicates a considerable accumulation of liquidity in 2018, possibly for strategic investments or debt management, and a subsequent reduction the following year.
- Current Liabilities
- Current liabilities showed a consistent upward trajectory from 2015 to 2018, increasing from 4,065 million US dollars to 7,557 million. However, in 2019, liabilities decreased to 5,100 million, reflecting a potential reduction in short-term obligations, possibly due to repayment or restructuring of debts.
- Cash Ratio
- The cash ratio indicates the company's ability to cover current liabilities with cash or cash equivalents. The ratio rose from 0.07 in 2015 to a peak of 0.44 in 2018, signifying improved liquidity. The subsequent decrease to 0.22 in 2019, although lower, still represents a higher liquidity position compared to earlier years. This trend coincides with the patterns observed in total cash assets and current liabilities, suggesting fluctuations in cash management and obligations coverage.