Phillips 66 (NYSE:PSX)

Current Ratio

The current ratio exhibited moderate fluctuations over the examined periods, generally remaining above 1.1 but below 1.6. It started at 1.51, then declined to a low of 1.18 in September 2016, before gradually increasing and stabilizing around 1.3 to 1.4 through 2017 and early 2018. The ratio peaked again at 1.48 in December 2018, followed by a slight decrease but maintained a consistent range near 1.3 in 2019. This pattern suggests that the company maintained a reasonable level of current assets in relation to current liabilities, emphasizing sustained short-term liquidity with minor seasonal or operational variations.

Quick Ratio

The quick ratio showed a more variable trend compared to the current ratio, ranging from a low of 0.73 in September 2016 to a high of 1.05 in December 2017. Initial values were below 0.9 in early 2016, indicating somewhat tighter liquidity when considering only the most liquid assets. The increase towards the end of 2017, surpassing 1.0, indicated an improvement in the company’s ability to cover short-term liabilities without relying on inventory. However, this ratio slightly decreased again throughout 2018 and 2019, fluctuating between 0.74 and 0.87, which signals some variability in liquid asset management but generally stable quick liquidity over the medium term.

Cash Ratio

The cash ratio demonstrated the greatest volatility and stayed at relatively low absolute values over all reporting periods. It started at 0.23 in the first quarter of 2016 and experienced several ups and downs, reaching a low of 0.08 in September 2018 and a high of 0.34 in December 2018. The pattern indicates that the company held a small proportion of cash and cash equivalents relative to current liabilities, relying more on receivables or other quick assets as reflected in the quick ratio. Despite fluctuations, the cash ratio consistently remained under 0.35, suggesting conservative cash holdings and reliance on other current assets to maintain liquidity.

The analysis of the quarterly financial data reveals notable fluctuations in the company’s liquidity position over the examined periods. The primary indicators considered are current assets, current liabilities, and the current ratio, which collectively provide insights into the short-term financial health and operational efficiency.

Current Assets

Current assets exhibit a general upward trend from March 2016 to December 2019, beginning at approximately 11,216 million USD and rising to 14,395 million USD by the end of 2019. There are periodic fluctuations visible within the quarters, with some dips observed notably around March 2018 and December 2018, indicating transient reductions in liquid resources or short-term assets. Despite these short-term declines, the overall trajectory indicates an increase in assets available for meeting short-term obligations.

Current Liabilities

Current liabilities show a more volatile pattern across the quarters, starting at 7,419 million USD in March 2016 and increasing in waves, reaching a peak of 12,083 million USD in September 2019 before falling back to 11,646 million USD by December 2019. Significant rises in liabilities are apparent around mid-2018 and mid-2019 periods, suggesting periods of increased short-term obligations, which may relate to operational or financing activities.

Current Ratio

The current ratio, an important liquidity ratio, fluctuates between 1.18 and 1.51 throughout the period analyzed. Initially, it declines from 1.51 in March 2016 to a low of 1.18 around September 2016, indicating a relative decrease in the cushion available to cover short-term liabilities. Following this, the ratio generally varies between 1.24 and 1.48 without establishing a clear upward or downward trend, ending at 1.24 in December 2019. This suggests a moderately stable liquidity position, generally maintaining a level above 1, which implies the company has more current assets than current liabilities but with limited margins of safety at times.

Overall, the data suggests that while the company has solid current assets capable of covering its current liabilities, fluctuations in liabilities have contributed to variability in liquidity. The current ratio remains generally healthy but indicates the need for continuous monitoring and management of short-term obligations to ensure financial stability, especially during periods of liability spikes.

Total Quick Assets

The total quick assets exhibit fluctuating values across the observed periods. Starting at 6,460 million USD in the first quarter of 2016, a general increasing trend was witnessed through the end of 2016, peaking at 9,108 million USD. In 2017, these assets initially decreased but then showed a significant rise by the fourth quarter, reaching 10,625 million USD. Throughout 2018, the amounts varied slightly but remained relatively stable around 9,000 million USD. In 2019, total quick assets hovered between approximately 8,500 and 10,100 million USD, indicating moderate volatility but maintaining a generally higher level compared to 2016.

Current Liabilities

Current liabilities demonstrated a steady upward move overall. Beginning at 7,419 million USD in the first quarter of 2016, liabilities trended upward reaching a high of 11,974 million USD by the third quarter of 2018. Despite minor dips, the liabilities remained elevated throughout 2019, fluctuating between 11,171 and 12,083 million USD. This persistent increase suggests growing short-term obligations over the period under review.

Quick Ratio

The quick ratio shows considerable variability but generally remains below or slightly above the benchmark of 1.0, indicating periods of tight liquidity. The ratio started at 0.87 in early 2016, declined to a low near 0.73 by the third quarter of that year, then recovered to a peak of 1.05 by the last quarter of 2017. This improvement suggests stronger short-term liquidity at that point. However, the ratio again dropped in 2018, remaining below 1.0, with values mostly in the mid-0.70s range, indicating relatively weaker immediate liquidity. By the end of 2018 and into 2019, the ratio fluctuated but showed some improvement, nearing 0.87 by the final quarter of 2019. Overall, the liquidity position oscillated but did not consistently indicate strong coverage of current liabilities by quick assets.

Summary

Over the analyzed period, total quick assets experienced overall growth but with intermittent fluctuations, while current liabilities steadily increased, exerting pressure on short-term financial stability. The quick ratio's fluctuations reveal varying liquidity conditions, occasionally reaching satisfactory levels but often below the preferred threshold, signifying periods where quick assets were insufficient to fully cover current liabilities. This pattern suggests a need for careful cash and working capital management to ensure ongoing liquidity.

The analysis of the quarterly financial data reveals several notable trends in liquidity and short-term financial management over the examined periods.

Total Cash Assets

The company's total cash assets demonstrated considerable fluctuations throughout the periods. Initially, there was a rising trend from the first quarter of 2016 through the end of that year, peaking significantly at the end of 2016 (December 31, 2016). Following this peak, cash assets declined sharply in the first quarter of 2017 but then exhibited volatility with intermittent increases and decreases across subsequent quarters. Notably, there were quarters with substantial rises such as December 2017 and again at the end of 2018, reflecting possible strategic cash management or operational cash flow variations. However, these peaks were often followed by rapid declines, indicating variability in cash holdings.

Current Liabilities

Current liabilities showed an overall upward trajectory with some fluctuations. Starting from approximately $7.4 billion in March 2016, liabilities increased through mid-2016, peaking near $10.4 billion in June 2016, then slightly falling by the end of 2016. In 2017 and 2018, current liabilities again trended upwards, peaking at roughly $11.97 billion in September 2018. The data toward the end of 2019 suggests current liabilities stabilized somewhat but remained high relative to the beginning of the period. This continuous increase indicates growing short-term obligations potentially linked to operational expansion or financing activities.

Cash Ratio

The cash ratio, a measure of liquidity representing cash assets relative to current liabilities, consistently remained below 0.35 throughout the periods, indicating relatively low immediate liquidity. The ratio exhibited a cyclical pattern with troughs corresponding to quarters of low cash assets compared to liabilities and peaks often aligning with significant increases in cash holdings. The lowest points appeared in early to mid-2018, where the ratio dipped as low as 0.08, suggesting tight liquidity in those quarters. Peaks such as at the end of 2018 (0.34) show transient improvement in the company's capacity to cover short-term liabilities with cash. Overall, despite occasional improvement, the cash ratio remained modest, which could imply reliance on other current assets or financing means to meet short-term obligations.

In summary, the financial data reveals a company experiencing volatility in cash reserves alongside progressively increasing current liabilities. The low and fluctuating cash ratio underscores a cautious liquidity posture, with cash assets covering only a small fraction of short-term debts at most times. This pattern suggests the need for effective liquidity management to ensure operational stability given the growth in current liabilities over the reported quarters.