Raytheon Co. (NYSE:RTN)

The financial data indicates a consistent downward trend in the liquidity ratios of the company over the five-year period from 2015 to 2019. Each key liquidity measure—the current ratio, quick ratio, and cash ratio—demonstrates gradual decreases, suggesting a shift in the company's ability to cover short-term obligations with its liquid assets.

Current ratio

Decreased from 1.6 in 2015 to 1.34 in 2019, showing a steady decline year-over-year. This indicates a reduction in the company's current assets relative to its current liabilities, though it remained above 1, implying it still had more current assets than current liabilities throughout the period.

Quick ratio

Fell from 1.43 in 2015 to 1.2 in 2019, following a similar pattern to the current ratio. This reduction suggests that the company's more liquid assets (excluding inventories) have diminished in proportion to its current liabilities, potentially signaling tightening liquidity.

Cash ratio

Showed a decline from 0.52 in 2015 to 0.44 in 2019. Though the cash ratio values are lower than the other liquidity ratios, the decrement remained modest, reflecting a slight decrease in the company's cash and cash equivalents relative to its current liabilities.

Overall, the downward trends in all liquidity ratios may reflect changes in working capital management, possibly through increased liabilities, reduced liquid assets, or both. While the ratios remain above critical thresholds indicating the company retained a degree of short-term financial strength, the consistent decreases warrant attention to ensure liquidity remains sufficient to meet obligations.

Current Assets

Current assets demonstrated a consistent upward trend over the observed five-year period. Starting at 9,812 million US dollars in 2015, they increased annually to reach 13,082 million US dollars by the end of 2019. This steady growth suggests an expansion in short-term resources available to the company, potentially reflecting improved liquidity or increased operational scale.

Current Liabilities

Current liabilities also showed a continuous increase from 6,126 million US dollars in 2015 to 9,791 million US dollars in 2019. The rising trend indicates growing short-term obligations which may be due to higher accounts payable, accrued expenses, or other short-term debts, possibly paralleling the company’s growth.

Current Ratio

Despite increases in both current assets and current liabilities, the current ratio declined progressively from 1.60 in 2015 to 1.34 in 2019. This downward trajectory indicates that the growth rate of current liabilities outpaced that of current assets, leading to a gradual decrease in the company’s short-term liquidity cushion. While the ratio remains above 1, suggesting the company maintains sufficient resources to cover current obligations, the decreasing trend may warrant monitoring to ensure liquidity remains adequate.

The data reveals several key trends regarding the liquidity position over the five-year period ending December 31, 2019.

Total quick assets

There is a consistent increase in total quick assets from 8,764 million US dollars in 2015 to 11,778 million US dollars in 2019. This upward trend indicates an increasing availability of highly liquid assets over the years.

Current liabilities

Current liabilities also show a steady increase, rising from 6,126 million US dollars in 2015 to 9,791 million US dollars in 2019. This growth suggests an increasing level of short-term obligations to be met within the year.

Quick ratio

The quick ratio demonstrates a declining trend despite the increases in quick assets and current liabilities. Starting at 1.43 in 2015, the ratio decreases progressively each year to 1.2 by the end of 2019. This decline indicates that the growth rate of current liabilities surpasses that of quick assets, resulting in a gradual weakening of the company's short-term liquidity cushion.

In summary, while quick assets have increased over the period, current liabilities have grown at a faster pace, leading to a diminishing quick ratio. This trend signals a relative decline in the company's ability to cover its current obligations with its most liquid assets, which may warrant closer attention to liquidity management moving forward.

Total Cash Assets

The total cash assets showed a general upward trend over the observed period. Beginning at 3,200 million US dollars in 2015, the cash asset value increased moderately to 3,403 million in 2016 and remained relatively stable at 3,400 million in 2017. Thereafter, a steady increase was observed, reaching 3,608 million in 2018 and further rising to 4,292 million in 2019, indicating strengthened liquidity reserves over time.

Current Liabilities

Current liabilities exhibited a consistent rise each year. Starting at 6,126 million US dollars in 2015, liabilities increased progressively to 6,427 million in 2016, 7,348 million in 2017, 8,288 million in 2018, and reached 9,791 million in 2019. This steady increase signals growing short-term obligations, which may reflect expanding operations or increased financial commitments.

Cash Ratio

The cash ratio, which measures the company's ability to cover current liabilities using only cash and cash equivalents, showed a declining trend. It decreased from 0.52 in 2015 to 0.53 in 2016, then dropped to 0.46 in 2017, followed by a further decline and stabilization at 0.44 in both 2018 and 2019. Despite the increase in total cash assets, the faster growth in current liabilities resulted in reduced liquidity coverage by cash reserves.

Overall Analysis

The data reflects that while cash assets increased steadily, the more rapid rise in current liabilities has caused a decline in the cash ratio, indicating comparatively weaker immediate liquidity over the five-year period. The company appears to be managing larger short-term obligations with a relatively smaller proportion of cash assets readily available, which may warrant attention to liquidity management strategies going forward.