Analysis of Liquidity Ratios
Quarterly Data
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
Paycom Software Inc., liquidity ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
- Current Ratio
- The current ratio demonstrates a consistently stable to slightly improving liquidity position over the observed periods. Starting at 1.06 in March 2018, it fluctuated marginally between 1.03 and 1.13 until late 2021. From early 2022 onwards, the ratio shows a marked increase, reaching 1.24 by September 2023. This upward trend indicates an enhanced ability to cover short-term liabilities with current assets, suggesting strengthening liquidity.
- Quick Ratio
- The quick ratio, reflecting the ability to meet short-term obligations without relying on inventory, starts at a very low level of 0.06 in March 2018. It remains relatively subdued and volatile through 2018 and 2019, ranging between 0.05 and 0.12. From 2020 onward, there is a gradual but noticeable upward trend, with values reaching up to 0.25 by June 2023, slightly decreasing to 0.24 by September 2023. This progression signals an improving liquidity profile excluding less liquid assets.
- Cash Ratio
- The cash ratio trends closely mirror those of the quick ratio, beginning at 0.06 in March 2018 and initially showing minor fluctuations with the lowest point at 0.04 in December 2018. Starting in 2020, a steady increase is observable, reaching as high as 0.25 in June 2023 before a slight decrease to 0.23 in September 2023. This indicates progressively larger cash and cash equivalents available relative to current liabilities, further supporting an improved liquidity stance.
Current Ratio
Paycom Software Inc., current ratio calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q3 2023 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
- Current Assets
- Current assets demonstrate a generally increasing trend over the analyzed periods with some fluctuations. The value increased from approximately 1,205 million in March 2018 to a peak of about 3,313 million in September 2021. A notable rise is observed between December 2020 and September 2021, suggesting a buildup in liquidity or short-term resources during that interval. However, following this peak, current assets declined significantly in the subsequent quarters, particularly from March 2022 to September 2023, where values fell from approximately 4,434 million to about 2,563 million, indicating a reduction in short-term asset holdings during 2022 and 2023.
- Current Liabilities
- Current liabilities exhibit a pattern closely mirroring that of current assets, but with generally slightly lower values. Starting at about 1,141 million in March 2018, liabilities increased steadily, reaching a high point around 4,113 million in March 2022. This substantial growth from late 2020 into early 2022 indicates a marked increase in short-term obligations. Post this peak, current liabilities show a decline similar to the current assets trend, dropping to about 2,070 million by September 2023. The simultaneous rise and fall of both assets and liabilities suggests correlated movements in working capital components.
- Current Ratio
- The current ratio remains relatively stable throughout the period, oscillating narrowly above 1.0, starting at 1.06 in early 2018 and improving modestly to around 1.24 by the latest period in September 2023. This indicates that despite the fluctuations in absolute values of current assets and liabilities, the company maintained a consistent and slightly improving ability to cover short-term liabilities with short-term assets. The current ratio's upward trend from 2021 onwards points towards an improving liquidity position, possibly reflecting enhanced efficiency in managing working capital or a strategic conservatism in liquidity management.
Quick Ratio
Paycom Software Inc., quick ratio calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q3 2023 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
The analysis of the quarterly financial data reveals several notable trends in liquidity and short-term financial position over the reported periods.
- Total quick assets
- Total quick assets exhibit a generally increasing trend from March 2018 through September 2023, with some periods of fluctuation. Starting at approximately $70.5 million in early 2018, the values dipped in mid to late 2018 but then increased steadily through 2019 and 2020. A marked acceleration in growth is observable from early 2021 onwards, reaching a peak of over $552 million by mid-2023, before a slight decrease toward the third quarter of 2023. This upward trajectory suggests improving liquidity and an accumulation of liquid assets over the medium to long term.
- Current liabilities
- Current liabilities show significant volatility throughout the timeframe. Beginning at around $1.14 billion in March 2018, the figures fluctuate considerably with intermittent decreases and sharp increases. Notably, liabilities spiked to their highest levels at various points, including mid-2019, early 2021, and especially in the first quarter of 2022, peaking above $4.1 billion. Following this peak, liabilities sharply declined in the remaining 2022 quarters before again fluctuating downwards in 2023, settling near $2.07 billion by September 2023. The volatility in current liabilities may indicate variable operational or financing activities affecting short-term obligations.
- Quick ratio
- The quick ratio presents an overall upward trend, despite some fluctuations, indicating an improvement in the company's ability to cover current liabilities with its most liquid assets. Initial ratios were very low, near 0.05 to 0.06 in 2018, reflecting limited immediate liquidity relative to short-term obligations. The ratio gradually improved across 2019 and 2020, stabilizing near 0.1, before increasing more substantially in 2021 and 2022. By late 2022 and into 2023, the quick ratio rose to levels between 0.18 and 0.25, suggesting enhanced liquidity positioning although still below a ratio of 1.0, which would indicate full coverage of current liabilities by quick assets. The improvement in this ratio suggests progress toward better short-term financial health but also highlights continuing constraints in liquidity relative to liabilities.
In summary, the company’s short-term liquid assets have grown substantially over the observed period, while current liabilities have shown significant variation with periods of considerable increase and subsequent decrease. The quick ratio's gradual increase reflects improved liquidity, though the ratio remains below unity, indicating ongoing pressure to fully cover current liabilities with quick assets. The data suggests a strengthening short-term financial position, albeit with caution due to liabilities volatility and quick ratio levels remaining moderate.
Cash Ratio
Paycom Software Inc., cash ratio calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q3 2023 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
- Total Cash Assets
- The total cash assets exhibited notable fluctuations over the observed periods. Initial values ranged around $54 million to $85 million in 2018, followed by a significant increase reaching over $133 million by the end of 2019. During 2020, cash assets showed variability but maintained a general upward trend, peaking at approximately $277 million by the end of 2021. A strong increase occurred in early 2022, surpassing $360 million, followed by a slight dip mid-year but recovering and reaching the highest level of approximately $536 million by mid-2023. The most recent value showed a modest decline to about $484 million, suggesting some recent cash utilization or asset adjustments.
- Current Liabilities
- Current liabilities demonstrated considerable volatility throughout the period. Initially around $947 million to over $1 billion during 2018, liabilities spiked sharply toward the end of 2019, peaking above $1.75 billion. The subsequent quarters exhibited fluctuations, with liabilities oscillating between $1.1 billion and over $3 billion from 2020 to 2023. The highest recorded liabilities were seen in early 2022 at over $4.1 billion, before experiencing substantial reductions and fluctuations through 2023, with values stabilizing around $2 billion by the latest quarter.
- Cash Ratio
- The cash ratio, representing the liquidity position relative to current liabilities, reflected a generally low but improving trend over time. In 2018, values ranged from 0.04 to 0.12, indicating limited immediate liquidity relative to short-term obligations. From 2019 into 2020, the ratio remained below 0.14 but showed improvement in later quarters. Notably, the cash ratio increased markedly from 0.09 in late 2021 to a peak of 0.25 in mid-2023, signifying enhanced liquidity management or accumulation of liquid assets relative to current liabilities. The most recent figure showed a slight decrease to 0.23, maintaining a relatively strong liquidity position compared to earlier periods.
- Summary of Trends
- Overall, the data indicates a substantial growth in cash assets over the time frame, with periods of notable volatility in current liabilities. Despite large fluctuations in liabilities, the company’s ability to maintain and improve its cash ratio suggests a strengthening in short-term financial stability and liquidity. The marked increase in cash assets combined with the improved cash ratio may reflect strategic cash reserves accumulation or effective management of current liabilities. However, the volatility in liabilities underscores the need to monitor short-term obligations closely to sustain liquidity levels.