Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Raytheon Co., liquidity ratios
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.34 | 1.46 | 1.54 | 1.66 | 1.60 | |
| Quick ratio | 1.20 | 1.31 | 1.36 | 1.49 | 1.43 | |
| Cash ratio | 0.44 | 0.44 | 0.46 | 0.53 | 0.52 |
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).
An analysis of the liquidity position from 2015 to 2019 reveals a general contraction in short-term solvency margins following a peak in 2016. While the entity maintains the capacity to cover its current liabilities, a consistent downward trajectory is observed across all measured liquidity indicators during the latter half of the period.
- Current Ratio
- The current ratio increased slightly to 1.66 in 2016 before entering a sustained decline, reaching 1.34 by December 31, 2019. This trend indicates a reduction in the overall cushion of current assets available to cover short-term obligations.
- Quick Ratio
- A parallel pattern is evident in the quick ratio, which peaked at 1.49 in 2016 and subsequently decreased to 1.20 by 2019. Despite this decline, the ratio remains above 1.0, suggesting that the company can meet its current liabilities without relying on the sale of inventory.
- Cash Ratio
- The cash ratio experienced a slight increase to 0.53 in 2016, followed by a decrease to 0.46 in 2017 and further stabilization at 0.44 in both 2018 and 2019. This suggests a period of relative stability in the most immediate liquid reserves relative to current liabilities toward the end of the five-year window.
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Current Ratio
Raytheon Co., 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 | 13,082) | 12,136) | 11,326) | 10,678) | 9,812) | |
| Current liabilities | 9,791) | 8,288) | 7,348) | 6,427) | 6,126) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.34 | 1.46 | 1.54 | 1.66 | 1.60 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX 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
= 13,082 ÷ 9,791 = 1.34
2 Click competitor name to see calculations.
A review of the liquidity position from 2015 to 2019 reveals a consistent growth in both current assets and current liabilities, coupled with a gradual decline in the current ratio after 2016.
- Current Asset Growth
- Current assets exhibited steady year-over-year growth, increasing from US$ 9,812 million in 2015 to US$ 13,082 million by 2019. This represents a consistent expansion of short-term resources over the five-year period.
- Current Liability Expansion
- Current liabilities also increased throughout the period, rising from US$ 6,126 million in 2015 to US$ 9,791 million in 2019. The pace of increase in liabilities accelerated particularly between 2017 and 2019, growing more rapidly than the corresponding asset base.
- Current Ratio Trend
- The current ratio peaked at 1.66 in 2016 before entering a sustained downward trend, reaching 1.34 by the end of 2019. This decline indicates that short-term obligations have grown at a faster rate than the assets available to cover them, resulting in a reduced liquidity margin. Despite this trajectory, the ratio remained above 1.0 throughout the observed period, suggesting the maintenance of a sufficient buffer to meet short-term obligations.
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Quick Ratio
Raytheon Co., 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 | 4,292) | 3,608) | 3,103) | 3,303) | 2,328) | |
| Short-term investments | —) | —) | 297) | 100) | 872) | |
| Receivables, net | 1,364) | 1,648) | 1,324) | 1,218) | 1,169) | |
| Contract assets | 6,122) | 5,594) | 5,247) | 4,984) | 4,395) | |
| Total quick assets | 11,778) | 10,850) | 9,971) | 9,605) | 8,764) | |
| Current liabilities | 9,791) | 8,288) | 7,348) | 6,427) | 6,126) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.20 | 1.31 | 1.36 | 1.49 | 1.43 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX 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
= 11,778 ÷ 9,791 = 1.20
2 Click competitor name to see calculations.
The liquidity profile exhibits a general trend of expansion in both liquid assets and short-term obligations between 2015 and 2019, although the rate of growth in liabilities has outpaced the growth of quick assets.
- Asset and Liability Growth
- Total quick assets increased steadily from US$ 8,764 million in 2015 to US$ 11,778 million in 2019. Simultaneously, current liabilities rose from US$ 6,126 million to US$ 9,791 million. The absolute increase in current liabilities is more pronounced than the growth in quick assets, contributing to a shift in the company's short-term financial positioning.
- Quick Ratio Trajectory
- The quick ratio reached a peak of 1.49 in 2016 before initiating a consistent year-over-year decline, ending at 1.20 in 2019. This downward trend indicates a gradual reduction in the margin of safety available to meet immediate financial obligations without the sale of inventory.
- Liquidity Solvency Analysis
- Despite the observed compression of the ratio, the value remained above 1.00 throughout the entire analysis period. This signifies that the company maintained sufficient highly liquid assets to cover 100% of its current liabilities at each reporting date, preserving a baseline of short-term solvency.
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Cash Ratio
Raytheon Co., 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 | 4,292) | 3,608) | 3,103) | 3,303) | 2,328) | |
| Short-term investments | —) | —) | 297) | 100) | 872) | |
| Total cash assets | 4,292) | 3,608) | 3,400) | 3,403) | 3,200) | |
| Current liabilities | 9,791) | 8,288) | 7,348) | 6,427) | 6,126) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.44 | 0.44 | 0.46 | 0.53 | 0.52 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX 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
= 4,292 ÷ 9,791 = 0.44
2 Click competitor name to see calculations.
An analysis of the liquidity position from 2015 to 2019 reveals a divergent trend between the growth of cash assets and the growth of short-term obligations. While absolute cash holdings increased over the period, the rate of increase in current liabilities was more pronounced, leading to a compression of the cash ratio.
- Total Cash Assets
- Cash assets demonstrated a general upward trajectory, rising from 3,200 million US$ in 2015 to 4,292 million US$ by the end of 2019. The most significant expansion occurred between 2018 and 2019, during which assets increased by approximately 684 million US$.
- Current Liabilities
- Current liabilities exhibited consistent year-over-year growth throughout the five-year span. Obligations rose from 6,126 million US$ in 2015 to 9,791 million US$ in 2019, representing a total increase of approximately 60%.
- Cash Ratio Trends
- The cash ratio peaked at 0.53 in 2016 before experiencing a decline and subsequently stabilizing at 0.44 in 2018 and 2019. This downward trend indicates that the accumulation of cash did not keep pace with the growth of current liabilities, resulting in a lower proportion of liquid assets available to cover immediate obligations.
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