Reynolds American Inc. (NYSE:RAI)

Current Ratio Trends

The current ratio exhibited fluctuations across the reviewed periods, starting at 0.97 in March 2012, declining to a low of 0.74 by September 2012, then increasing notably to 1.28 at the end of 2012. Throughout 2013, it remained relatively stable around the 1.2 mark before gradually decreasing in 2014 to as low as 0.94 by December. In 2015, the ratio improved again, peaking near 1.17 in the last quarter before declining consistently in 2016 and early 2017, reaching a trough of 0.85 in December 2016 and slightly recovering to 0.87 by March 2017. Overall, this indicates periodically varying liquidity positions, suggesting changes in current asset and liability management over time.

Quick Ratio Patterns

The quick ratio mirrored a general volatility pattern similar to the current ratio but at consistently lower values, reflecting more conservative liquidity measurements that exclude inventories. Beginning at 0.53 in early 2012, it dropped sharply to 0.28 and 0.31 in mid and late 2012, recovered to 0.72 by year-end 2012, and maintained a range between approximately 0.56 and 0.72 through 2013. The ratio declined steadily during 2014, reaching as low as 0.32 by December before rebounding somewhat in 2015. However, in 2016 and into early 2017, it generally trended downward, navigating between 0.42 and 0.60. These movements suggest a fluctuating capacity to cover short-term obligations with the most liquid assets excluding inventory.

Cash Ratio Observations

The cash ratio showed consistent variation analogous to the quick ratio trends but generally at lower figures, indicating a more stringent liquidity perspective focused solely on cash and cash equivalents. Its value began at 0.49 in March 2012 and dipped to about 0.23-0.27 through mid to late 2012. It peaked at 0.68 in June 2015, reflecting a favorable liquidity position at that time. However, subsequent quarters showed a decline, with ratios mostly oscillating between 0.27 and 0.59 from 2013 through 2016. Early 2017 data indicates a mild improvement reaching 0.54. The trajectory points to fluctuating availability of immediate liquid resources relative to current liabilities, signaling varying degrees of short-term financial conservatism and cash management effectiveness.

Overall Liquidity Analysis

The liquidity ratios collectively indicate that the company experienced variable liquidity conditions across the examined periods. Notable improvements in liquidity were observed at the end of 2012 and mid-2015, while declines were more evident in late 2014 and from mid-2016 onward. These shifts could be attributed to operational, financing, or investment activity fluctuations affecting cash flows, current assets, or current liabilities. The persistent ratios below or near 1.0 during several periods highlight potential vulnerabilities in meeting short-term obligations without asset liquidation or additional financing.

The analysis of the quarterly financial data reveals significant fluctuations in current assets, current liabilities, and the current ratio over the observed periods.

Current Assets

Current assets demonstrate variability with periods of increase and decrease. Notable peaks occur on March 31, 2015, and March 31, 2016, with values reaching 7,451 million and 7,529 million US dollars, respectively. Between these peaks, there are intermittent drops, such as on June 30, 2015, and June 30, 2016, where the values fall to 6,423 million and 4,905 million US dollars, respectively. Overall, despite short-term dips, there is a general upward trend indicating growth in liquid asset holdings over the long term.

Current Liabilities

Current liabilities follow a somewhat parallel but more concentrated trend of increase, especially notable from the first quarter of 2015 onward. A substantial increase is recorded on June 30, 2016, where liabilities surge to 7,604 million US dollars, the highest in the examined timeframe. Prior to this, liabilities were relatively lower with periodic rises and falls but post-2015 they show increased volatility and a higher baseline, suggesting rising short-term obligations.

Current Ratio

The current ratio indicates the company’s short-term liquidity position. This ratio fluctuates considerably but generally stays near the benchmark value around 1.0. Early in the period, the ratio drops below 1.0 on multiple occasions, signaling potential liquidity concerns with values as low as 0.74 in September 2012. It improves significantly during late 2012 and 2013, exceeding 1.0 and reaching a peak of 1.29 in June 2013. However, from late 2014 to the end of 2016, the current ratio exhibits a downward drift, frequently falling below 1.0, with the lowest point at 0.85 on March 31, 2017. This declining trend suggests increasing pressure on liquidity and a less favorable short-term financial position in the latter periods.

The data reveals fluctuations in the key liquidity metrics over the observed periods, highlighting variable short-term financial health and asset management trends.

Total Quick Assets

Total quick assets demonstrate a volatile pattern across the periods. Initial values show a decline from 2,581 million USD in early 2012 to as low as 1,214 million USD mid-2012, followed by a recovery to 2,701 million USD by the end of 2012. In the subsequent years, the values oscillate with intermittent peaks, notably reaching 4,554 million USD in mid-2015 and again 4,596 million USD in early 2016, interspersed with significant drops, reflecting potentially uneven cash or near-cash asset availability.

Current Liabilities

Current liabilities exhibit less pronounced variability but remain high relative to quick assets throughout the timeframe. There is a notable dip around mid-2012 and early 2013, followed by a general upward trend reaching a peak of 7,604 million USD at the end of 2016. The trend suggests increasing short-term obligations, which could impact liquidity if not matched by equivalent asset growth.

Quick Ratio

The quick ratio mirrors the fluctuations seen in total quick assets and current liabilities. It remains below 1.0 during all periods, indicating constraints in covering current liabilities with liquid assets. The ratio dips to its lowest point around 0.28 mid-2012 and again in early 2015 (0.32), while reaching relative highs near 0.72 at the end of 2012 and mid-2013. Persistent values below 1 highlight an ongoing risk in liquidity management, though periods of improvement suggest intermittent strengthening.

Overall, the data illustrate challenges in maintaining consistent liquidity, marked by fluctuating quick assets and rising current liabilities. These patterns emphasize the importance of close monitoring and potential strategic adjustments to ensure adequate short-term financial stability.

The analysis of the financial data over the quarterly periods reveals several notable trends and fluctuations across the reported items, specifically total cash assets, current liabilities, and the cash ratio.

Total Cash Assets

Total cash assets demonstrate a marked volatility throughout the observed timeline. Initially, there is a sharp decline from 2,396 million US dollars in the first quarter of 2012 to a trough of 1,005 million by mid-2012. This is followed by a recovery phase, with cash assets rising to as high as 2,778 million at the start of 2013. Subsequent quarters show consistent oscillations with peaks such as 4,360 million in the second quarter of 2015 and troughs like 966 million at the end of 2014. Notably, after the peak in mid-2015, cash assets trend downward to about 1,944-2,051 million in 2016 before increasing again to 3,154 million by the first quarter of 2017. This pattern indicates periods of cash accumulation punctuated by significant drawdowns, suggesting variability in liquidity management or operational cash flows.

Current Liabilities

Current liabilities also exhibit considerable fluctuations, though with a generally increasing trend. Starting at 4,900 million in early 2012, liabilities decrease to around 2,953-3,076 million during 2013, indicating a reduction in short-term obligations during this period. However, post-2013, liabilities rise sharply, peaking at 7,604 million at the end of 2015. This significant increase could reflect greater short-term debt or accrued expenses. Following this peak, liabilities fluctuate but remain elevated relative to initial values, with levels around 4,778-5,891 million through early 2017. The upward movement in current liabilities suggests increased short-term financial commitments over the period analyzed.

Cash Ratio

The cash ratio, measuring liquidity by comparing cash assets to current liabilities, mirrors the volatility observed in cash assets and liabilities. It begins at a moderate 0.49 in early 2012, dips to a low of 0.23 mid-2012, and then recovers to a peak around 0.67 by early 2013. The ratio declines towards the end of 2014 reaching 0.27, indicating a reduced liquidity position then. In 2015, the ratio improves notably, peaking again at 0.68 mid-year, likely benefiting from increased cash assets and/or stabilization in liabilities. Afterward, the ratio trends generally downward, with lows around 0.39 in mid-2016 before a slight rebound to 0.54 by the first quarter of 2017. Overall, the cash ratio values suggest intermittent liquidity constraints, with periods of stronger cash positions alternated by diminished coverage of liabilities by cash.

In summary, the company’s liquidity profile over the observed quarters is characterized by significant variability in cash holdings and current liabilities, leading to fluctuating cash ratios that reflect alternating phases of stronger and weaker short-term financial health. The observed peaks and troughs in cash assets and liabilities underscore the importance of ongoing liquidity monitoring to ensure sufficient cash coverage relative to obligations.