McDonald’s Corp. (NYSE:MCD)

The analysis of the liquidity ratios over the observed quarterly periods reveals varying trends in the company's short-term financial health.

Current Ratio

The current ratio exhibited fluctuations, beginning at 1.19 and reaching peaks as high as 1.78 during 2021, indicating a relatively strong short-term liquidity position at times. However, a general downward trend is noticeable starting in early 2024, where the ratio fell below 1.0 at certain points, such as 0.78 in September 2024 and 1.0 in September 2025. This suggests a tightening in current assets relative to current liabilities, potentially implying increased liquidity risk toward the later periods.

Quick Ratio

The quick ratio, which excludes inventory from current assets, follows a similar pattern to the current ratio but remains consistently lower, reflecting the composition of current assets. It showed an initial increase peaking around the end of 2021, followed by variable performance with a marked decline starting in 2024 where it dipped below 1.0 multiple times. This trend indicates a reduced buffer of liquid assets against current liabilities, posing concerns about the ability to meet obligations without relying on inventory sales.

Cash Ratio

The cash ratio, representing the most conservative liquidity measure, showed the lowest values among the three ratios throughout the timeline. After rising during 2021, the ratio decreased substantially in the subsequent years, reaching very low points such as 0.17 in March 2024 and 0.19 in September 2024. The partial recovery observed toward mid to late 2025, with values around 0.4, remains modest. This suggests limited cash and cash equivalents to cover current liabilities, highlighting a potential cash management challenge.

Overall, liquidity indicators demonstrate a peak in early periods with a gradual decline and increased volatility in later years. The company's ability to cover short-term liabilities with liquid assets appears to have weakened, especially evident from the conservative cash ratio perspective. This trend may require strategic attention to improve cash flows and asset management to maintain financial stability.

The analysis of the quarterly financial data reveals several noteworthy trends in the liquidity position of the company over the observed periods.

Current Assets

Current assets exhibit fluctuating values with a general pattern of volatility. Initial quarters show values ranging from approximately 4.6 billion to around 7.1 billion USD, followed by several ups and downs. Some periods, such as March 31, 2023, and December 31, 2023, indicate peaks above 7.9 billion USD, while other quarters like March 31, 2024, and March 31, 2025, fall below 5 billion USD. The variability suggests intermittent changes in asset management or operating conditions.

Current Liabilities

Current liabilities display a similarly variable pattern but generally remain within a narrower range compared to current assets. Early on, liabilities fluctuate between approximately 3.5 billion and 5 billion USD. Later quarters include significant spikes such as December 31, 2023, where liabilities peak at approximately 6.9 billion USD. The volatility in this metric indicates periodic shifts in short-term obligations or possible changes in financing strategy.

Current Ratio

The current ratio demonstrates considerable variation over time, signaling fluctuating liquidity levels. At some points, the ratio exceeds 1.5, denoting a relatively strong short-term financial position, especially during quarters like December 31, 2021, and September 30, 2022. Conversely, several quarters reflect contraction in the current ratio, falling below 1, highlighting potential liquidity constraints, notably on March 31, 2024, and September 30, 2024. Towards the final observed periods, the ratio trends closer to 1, suggesting a balanced but potentially tight liquidity situation.

Overall, the data indicate variability in both asset and liability management that directly impact the company’s liquidity ratios. Periods of high current ratios imply cautious asset coverage of short-term liabilities, whereas the dips may suggest short-term funding pressures or adjustments in working capital strategy. The peaks and troughs also point to cyclical or event-driven influences affecting the company’s short-term financial health.

Total Quick Assets

The total quick assets exhibit noticeable fluctuations throughout the observed periods. Initially, from early 2021 to the end of that year, the values increased steadily, peaking around December 2021. Subsequently, during 2022, there was a decline followed by some recovery in the latter part of the year. In 2023, the asset values showed considerable volatility, marked by significant dips and recoveries each quarter. From 2024 onward, a declining trend is evident, with quick assets generally reducing across the quarters up to the third quarter of 2025.

Current Liabilities

Current liabilities display a variable pattern with some quarters experiencing increases and others decreases. In the first half of 2021, liabilities fluctuated moderately but showed a marked decrease mid-year. Entering 2022, the liabilities experienced a period of relative stability with minor changes until late 2022, where a sharp increase is observable. Throughout 2023, the liabilities vary considerably, including peaks in the last quarter. In 2024 and continuing into 2025, current liabilities remain inconsistent but generally appear elevated relative to earlier years, particularly with sharp increases in certain quarters.

Quick Ratio

The quick ratio indicates the company's ability to cover its current liabilities with liquid assets and reveals a dynamic performance over the analyzed timeframe. During 2021, the ratio improved steadily, exceeding 1.2 by year-end, signaling a solid liquidity position. Thereafter, in 2022 and into 2023, it shows variability with periods both above and below 1.0, reflecting fluctuations in liquidity management. Notably, in early to mid-2024, the ratio dips below 1.0, reaching its lowest points, suggesting potential concerns about short-term financial health during these quarters. The ratio improves somewhat in late 2024 and early 2025 but remains volatile, reflecting ongoing liquidity challenges.

Overall Insights

The data suggest that while the company maintained a generally adequate liquidity position through 2021, subsequent periods were characterized by instability in liquid asset levels and current liabilities. This volatility has directly influenced the quick ratio, which frequently fell below the critical threshold of 1.0 in several quarters from 2022 to 2025, implying periods where short-term liabilities may not have been fully covered by quick assets. The declining trend in quick assets in the later years alongside relatively high or rising current liabilities may be indicative of increasing short-term financial risk. The company’s liquidity management practices appear to have faced challenges during the recent periods, warranting close monitoring and potential strategic adjustments to ensure sustained short-term financial stability.

Total cash assets

The total cash assets display a fluctuating pattern over the observed periods. Initially, cash assets rose from $3,020 million at the end of March 2021 to a peak of $4,709 million in December 2021. Following this, there was a pronounced decline through mid-2022, reaching a low point in June 2022 at $1,873 million. Subsequently, cash levels recovered moderately toward the end of 2023, regaining values above $3,000 million. However, from early 2024 through mid-2025, the cash reserves again diminished, albeit with some incremental increases, ending near $2,413 million by September 2025. Overall, the company’s cash holdings show significant volatility with cycles of both sharp increases and decreases within relatively short timeframes.

Current liabilities

Current liabilities exhibit considerable variation across the quarters. Starting at $4,580 million in March 2021, liabilities decreased toward mid-2021 but rose substantially again by late 2021, reaching approximately $5,096 million in September 2021 before dropping to around $3,480 million in June 2022. From late 2022 to early 2023, current liabilities increased notably, particularly spiking in December 2023 to $6,859 million—the highest observed in the dataset. Although subsequent quarters show a decline in liabilities, the figures remain volatile with levels between about $3,860 million and $6,000 million through mid-2025. This suggests episodes of increased short-term obligations potentially linked to operational or financing activities.

Cash ratio

The cash ratio, representing the proportion of cash assets to current liabilities, reflects significant fluctuations consistent with the movements in cash and liabilities. Initially, it improved steadily from 0.66 in March 2021 to a peak of 1.17 in December 2021, indicating strong liquidity at that point. However, this ratio subsequently declined sharply, falling to as low as 0.17 in March 2024, showing a considerable reduction in liquidity relative to current obligations. While some modest recoveries are noted toward mid-2025, the ratio remains below 0.5 in most periods after early 2024, indicating a weaker cash position relative to liability levels and suggesting tighter short-term financial flexibility during this time frame.

Overall insights

The data indicates that liquidity, measured by cash assets and the cash ratio, is subject to marked variability, with periods of strong cash reserves followed by notable declines. This volatility, coupled with sizable swings in current liabilities, points to dynamic short-term financial management and possible impacts from operational demands or strategic financing decisions. The substantial peak in liabilities at the end of 2023 could signal either increased payables or short-term debt accumulation, affecting liquidity negatively as seen in the corresponding decline in the cash ratio. The generally lower liquidity ratios after early 2024 highlight a trend toward tighter cash availability relative to obligations, which may warrant closer monitoring for potential liquidity risks.