Analysis of Liquidity Ratios
Quarterly Data
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Reynolds American Inc., liquidity ratios (quarterly data)
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
- Current ratio
- The current ratio exhibited fluctuations throughout the examined periods, starting at 1.21 and peaking at 1.29 in the second quarter of 2013. A gradual decline followed, reaching a low of 0.85 in the fourth quarter of 2016. Notably, the ratio remained below 1.0 from late 2014 onwards with minor exceptions, indicating a potential decrease in short-term liquidity and a tighter working capital position over time.
- Quick ratio
- The quick ratio demonstrated a generally declining trend in the initial periods, dropping from 0.72 at the beginning of 2013 to a trough of 0.32 by the end of 2014. A temporary recovery occurred in mid-2015, reaching 0.71, followed by another downward movement and modest stabilization around 0.40 to 0.55 in the latter part of the timeline. This pattern suggests a narrowing cushion of liquid assets excluding inventory, potentially impacting the company's ability to meet immediate liabilities without relying on inventory sales.
- Cash ratio
- The cash ratio showed a similar trajectory to the quick ratio, beginning at 0.67 in early 2013, declining to a low of 0.27 by the end of 2014. Subsequent quarters reveal intermittent improvements, peaking at 0.68 in mid-2015, though the ratio remained generally below the initial levels throughout most of the periods analyzed. This outcome indicates that the most liquid assets, specifically cash and cash equivalents, were less capable of independently covering current liabilities over time, reflecting tighter liquidity conditions.
Current Ratio
Reynolds American Inc., current ratio calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current assets | 5,103) | 4,238) | 4,962) | 4,905) | 7,529) | 6,187) | 6,423) | 7,451) | 3,989) | 3,323) | 3,456) | 3,458) | 4,005) | 3,655) | 4,839) | 3,824) | 5,029) | ||||||
| Current liabilities | 5,891) | 4,985) | 5,069) | 4,778) | 7,604) | 5,291) | 5,678) | 6,442) | 4,225) | 3,544) | 3,286) | 3,323) | 3,680) | 3,076) | 4,010) | 2,953) | 4,145) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||
| Current ratio1 | 0.87 | 0.85 | 0.98 | 1.03 | 0.99 | 1.17 | 1.13 | 1.16 | 0.94 | 0.94 | 1.05 | 1.04 | 1.09 | 1.19 | 1.21 | 1.29 | 1.21 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Current Ratio, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Current ratio = Current assets ÷ Current liabilities
= 5,103 ÷ 5,891 = 0.87
2 Click competitor name to see calculations.
- Current Assets
- The current assets exhibit noticeable fluctuations across the observed quarters. Initially, values decreased from 5,029 million USD in March 2013 to 3,655 million USD by December 2013. Following this decline, current assets showed some recovery with intermittent variations, peaking at 7,529 million USD in March 2016, suggesting a temporary build-up of short-term resources. However, this peak was not sustained, as values declined afterward, reaching 5,103 million USD by March 2017. Overall, the trend indicates volatility but with periods of asset accumulation followed by consolidation or reduction.
- Current Liabilities
- Current liabilities followed a somewhat parallel volatile pattern. Beginning at 4,145 million USD in March 2013, liabilities dropped to 2,953 million USD in June 2013 and oscillated around this level through 2014. From 2015 onwards, liabilities saw a significant upward shift, peaking at 7,604 million USD in March 2016, slightly exceeding the peak of current assets for the same period. After this peak, liabilities decreased but remained elevated compared to earlier years, closing at 5,891 million USD in March 2017. This pattern suggests increasing short-term obligations, particularly during 2015 and 2016.
- Current Ratio
- The current ratio generally decreased across the period, indicating a tightening liquidity position. It started at comfortable levels above 1.2 in early 2013, signaling sufficient short-term asset coverage over liabilities. The ratio declined steadily through 2014, dropping below 1.0 by the end of that year, which implies current liabilities exceeded current assets in some quarters. Some improvement is observed in 2015 with the ratio rising to around 1.17 by the end of that year. However, in 2016 and early 2017, the ratio again fell below 1.0, reaching a low of 0.85 in December 2016 and 0.87 in March 2017, suggesting a weaker liquidity position and potentially indicating increased risk in meeting short-term obligations.
- Summary
- Over the observed quarters, the company exhibited significant volatility in both current assets and current liabilities. The peak in both metrics around early 2016 points to a period of increased balance sheet activity. However, the current ratio's downward trend, especially falling below the critical level of 1.0 in the last quarters, reflects a less favorable liquidity situation where short-term liabilities exceed current assets. This could indicate potential challenges in short-term financial flexibility or increased reliance on non-current funding or operational cash flow to meet imminent obligations. Monitoring liquidity measures would be advisable to assess the impact on working capital management and financial stability.
Quick Ratio
Reynolds American Inc., quick ratio calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Cash and cash equivalents | 3,154) | 2,051) | 1,898) | 1,918) | 4,441) | 2,567) | 2,920) | 4,013) | 1,615) | 966) | 1,289) | 1,313) | 1,826) | 1,500) | 2,694) | 1,664) | 2,778) | ||||||
| Short-term investments | —) | —) | 61) | 26) | 14) | 149) | 265) | 347) | —) | —) | —) | —) | —) | —) | —) | —) | —) | ||||||
| Accounts receivable | 55) | 66) | 37) | 89) | 80) | 68) | 62) | 145) | 118) | 116) | 89) | 98) | 100) | 106) | 84) | 105) | 104) | ||||||
| Accounts receivable, related party | 39) | 113) | 122) | 33) | 31) | 38) | 45) | 31) | 56) | 41) | 51) | 66) | 50) | 56) | 55) | 57) | 52) | ||||||
| Notes receivable | —) | —) | —) | —) | —) | —) | —) | —) | —) | —) | 1) | 1) | 37) | 37) | 36) | 34) | 35) | ||||||
| Other receivables | 13) | 10) | 10) | 13) | 30) | 35) | 28) | 18) | 12) | 12) | 12) | 11) | 11) | 16) | 11) | 12) | 12) | ||||||
| Total quick assets | 3,261) | 2,240) | 2,128) | 2,079) | 4,596) | 2,857) | 3,320) | 4,554) | 1,801) | 1,135) | 1,442) | 1,489) | 2,024) | 1,715) | 2,880) | 1,872) | 2,981) | ||||||
| Current liabilities | 5,891) | 4,985) | 5,069) | 4,778) | 7,604) | 5,291) | 5,678) | 6,442) | 4,225) | 3,544) | 3,286) | 3,323) | 3,680) | 3,076) | 4,010) | 2,953) | 4,145) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||
| Quick ratio1 | 0.55 | 0.45 | 0.42 | 0.44 | 0.60 | 0.54 | 0.58 | 0.71 | 0.43 | 0.32 | 0.44 | 0.45 | 0.55 | 0.56 | 0.72 | 0.63 | 0.72 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Quick Ratio, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 3,261 ÷ 5,891 = 0.55
2 Click competitor name to see calculations.
The financial data indicates fluctuations in the liquidity position of the company over the periods analyzed. The total quick assets, which represent the most liquid assets, show considerable variability, with notable peaks observed at the end of the first quarter of 2015 and the first quarter of 2016. Specifically, quick assets increased significantly to 4,554 million USD in March 2015 and again to 4,596 million USD in March 2016, indicating temporary boosts in liquid resources during these periods. However, these peaks were often followed by declines, suggesting either the utilization of liquid assets or shifts in asset composition.
Current liabilities exhibit a general upward trend throughout the timeline. Starting from 4,145 million USD in March 2013, current liabilities reached their highest levels in the first quarter of 2016 at 7,604 million USD, which signals increasing short-term obligations. Despite some intermittent decreases, the overall trajectory points to growing obligations that could exert pressure on short-term liquidity.
The quick ratio, a key measure of a firm’s ability to meet short-term liabilities with its most liquid assets, reflects these movements in assets and liabilities. The ratio remained below 1.0 during all periods, consistent with a less than ideal liquidity cushion. It declined from 0.72 in March 2013 to a low of 0.32 in December 2014, indicating deteriorating liquidity. Afterwards, it recovered partially, spiking to 0.71 in June 2015, coinciding with the surge in quick assets. Nonetheless, it generally oscillated between 0.40 and 0.60 in later periods, showing persistent challenges in maintaining strong quick liquidity levels relative to current liabilities.
Overall, the data suggests that while the company experienced episodic increases in liquid assets, the upward trend in current liabilities exerted downward pressure on liquidity ratios. The recurring suboptimal quick ratio values underline the necessity for continuous monitoring of short-term financial health and efficient management of liquid assets relative to short-term debt.
- Total Quick Assets
- Highly variable with notable peaks in early 2015 and early 2016, reflecting temporary liquidity boosts.
- Current Liabilities
- Generally increasing over time, reaching a peak in early 2016, indicating rising short-term obligations.
- Quick Ratio
- Consistently below 1, declined sharply until late 2014, followed by partial recoveries but overall remained under pressure.
Cash Ratio
Reynolds American Inc., cash ratio calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Cash and cash equivalents | 3,154) | 2,051) | 1,898) | 1,918) | 4,441) | 2,567) | 2,920) | 4,013) | 1,615) | 966) | 1,289) | 1,313) | 1,826) | 1,500) | 2,694) | 1,664) | 2,778) | ||||||
| Short-term investments | —) | —) | 61) | 26) | 14) | 149) | 265) | 347) | —) | —) | —) | —) | —) | —) | —) | —) | —) | ||||||
| Total cash assets | 3,154) | 2,051) | 1,959) | 1,944) | 4,455) | 2,716) | 3,185) | 4,360) | 1,615) | 966) | 1,289) | 1,313) | 1,826) | 1,500) | 2,694) | 1,664) | 2,778) | ||||||
| Current liabilities | 5,891) | 4,985) | 5,069) | 4,778) | 7,604) | 5,291) | 5,678) | 6,442) | 4,225) | 3,544) | 3,286) | 3,323) | 3,680) | 3,076) | 4,010) | 2,953) | 4,145) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||
| Cash ratio1 | 0.54 | 0.41 | 0.39 | 0.41 | 0.59 | 0.51 | 0.56 | 0.68 | 0.38 | 0.27 | 0.39 | 0.40 | 0.50 | 0.49 | 0.67 | 0.56 | 0.67 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Cash Ratio, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 3,154 ÷ 5,891 = 0.54
2 Click competitor name to see calculations.
- Total Cash Assets
- The total cash assets exhibit considerable fluctuation over the observed quarters. Initially, cash holdings decreased from 2,778 million USD at the end of March 2013 to a low of 966 million USD by December 2014. A marked increase follows, peaking at 4,360 million USD in June 2015, before declining again to approximately 1,944-2,051 million USD throughout 2016. By the first quarter of 2017, cash assets rose significantly to 3,154 million USD. This volatile behavior suggests active cash management or variable cash inflows and outflows possibly linked to operational cycles or financing activities.
- Current Liabilities
- Current liabilities show an overall upward trend with marked variability. Starting at 4,145 million USD in March 2013, they declined to a trough near 2,953 million USD in June 2013, but thereafter generally increased, reaching an apex of 7,604 million USD in March 2016. The last reported figure stands at 5,891 million USD in March 2017, still notably higher than initial levels. This upward trend in liabilities could imply increased short-term obligations potentially impacting liquidity.
- Cash Ratio
- The cash ratio, representing cash assets relative to current liabilities, reflects the fluctuations seen in cash and liabilities. It starts at a relatively healthy 0.67 in March 2013, then declines to lows around 0.27 by the end of 2014, indicating reduced immediate liquidity. The ratio improves temporarily in mid-2015, reaching 0.68, before slipping again through 2016 to around 0.39-0.41. By the first quarter of 2017, it recovers somewhat to 0.54. Despite intermittent improvements, the cash ratio generally remains below 1.0, signaling that cash alone is insufficient to cover current liabilities at most points, potentially necessitating reliance on other current assets or financing sources.
- Overall Insights
- The financial data indicates that while cash assets and current liabilities both experience significant volatility, liabilities show a more consistent upward direction over the period. The fluctuating yet often low cash ratio highlights potential liquidity challenges, where cash reserves may not consistently cover short-term obligations. The notable spikes in cash, particularly mid-2015 and early 2017, suggest episodic inflows or cash management actions aimed at strengthening liquidity. Continuous monitoring of cash flows, working capital management, and liability levels would be advisable to maintain an adequate liquidity position.