Verizon Communications Inc. (NYSE:VZ)

Current Ratio Analysis

The current ratio has demonstrated a consistent downward trend over the five-year period, decreasing from 1.38 in 2020 to 0.63 in 2024. This indicates a gradual reduction in the company's short-term liquidity position, suggesting that the firm has fewer current assets relative to its current liabilities year over year.

Quick Ratio Analysis

Similar to the current ratio, the quick ratio has declined sharply from 1.16 in 2020 to 0.47 in 2024. This ratio excludes inventory from current assets, implying a more immediate liquidity measure. The decrease points toward weakening ability to cover short-term obligations without relying on inventory sales.

Cash Ratio Analysis

The cash ratio has dropped significantly from 0.56 in 2020 to low levels around 0.05 in 2022 and 2023, with a marginal increase to 0.06 in 2024. Despite the slight uptick in the most recent year, the cash on hand relative to current liabilities remains considerably lower than in 2020, suggesting tight cash reserves available for immediate obligations.

Overall Liquidity Trend

The overall liquidity metrics portray a deteriorating liquidity condition over the reviewed period. All three ratios indicate a progressive decrease in the company’s capacity to meet short-term liabilities with available assets. This may warrant closer scrutiny of working capital management and potential liquidity risks in upcoming periods.

Current Assets

The current assets demonstrated a fluctuating trend over the five-year period. Starting from a high point of approximately 54.6 billion USD at the end of 2020, there was a sharp decline in 2021 to about 36.7 billion USD. This was followed by a marginal increase in 2022, reaching around 37.9 billion USD, and a slight decline again in 2023 to roughly 36.8 billion USD. By the end of 2024, there was a moderate recovery with current assets increasing to approximately 40.5 billion USD.

Current Liabilities

The current liabilities exhibited a consistent upward trend during the period under review. Starting at roughly 39.7 billion USD in 2020, liabilities increased steadily each year, reaching about 47.2 billion USD in 2021, 50.2 billion USD in 2022, 53.2 billion USD in 2023, and ultimately rising sharply to approximately 64.8 billion USD by the end of 2024. This steady rise indicates an increasing short-term obligation burden over the years.

Current Ratio

The current ratio, which measures liquidity by comparing current assets to current liabilities, showed a significant declining trend throughout the period. Beginning at a relatively healthy ratio of 1.38 in 2020, it dropped sharply to 0.78 in 2021 and further decreased gradually to 0.75 in 2022, 0.69 in 2023, and 0.63 in 2024. This downward trend signifies a deteriorating ability to cover short-term liabilities with short-term assets, reflecting increased liquidity risk over the years.

The analysis reveals a consistent downward trend in the quick ratio over the five-year period. Starting from a relatively healthy level of 1.16 in 2020, the quick ratio declined steadily to 0.47 by the end of 2024. This indicates a deterioration in the company's liquidity position, suggesting that the company's ability to meet short-term obligations with its most liquid assets has weakened.

The decline in the quick ratio is primarily driven by the changes observed in quick assets and current liabilities. Quick assets significantly decreased from $46,088 million in 2020 to around $27,150 million by 2023 before a slight recovery to $30,303 million in 2024. This substantial reduction in quick assets, nearly a 34% drop from 2020 to 2024, implies lower immediate liquid resources available to the company.

Conversely, current liabilities exhibit a noticeable upward trajectory throughout the same timeframe. Beginning at $39,660 million in 2020, current liabilities increased steadily to reach $64,771 million by 2024. This represents an increase of approximately 63%, indicating growing short-term obligations that the company must cover soon.

The diverging movements between quick assets and current liabilities – declining quick assets combined with rising current liabilities – are primarily responsible for the declining quick ratio and signal potential liquidity risk. The data suggests increasing pressure on the company’s short-term financial health, as the faster growth in liabilities relative to liquid assets may challenge the firm's capacity to cover imminent debts without raising additional capital or disposing of less liquid assets.

Overall, the trends highlight a worsening liquidity position across the observed periods, warranting careful monitoring and possible strategic actions to improve the quick ratio and enhance short-term financial stability.

The analysis of the presented financial data over the five-year period reveals several notable trends and shifts in liquidity and short-term obligations.

Total Cash Assets

A significant decline is observed from 22,171 million US dollars in 2020 to 2,921 million in 2021. This downward trend continues through 2023, reaching a low point of 2,065 million US dollars. There is a partial recovery in 2024 with cash assets increasing to 4,194 million US dollars, though still substantially below the 2020 level.

Current Liabilities

Current liabilities increase consistently year over year, starting at 39,660 million US dollars in 2020 and rising to 64,771 million US dollars by 2024. This steady growth indicates a rising short-term financial obligation over the period.

Cash Ratio

The cash ratio exhibits a sharp decrease from 0.56 in 2020 to a low range between 0.04 and 0.06 in the subsequent years. It remains low from 2021 through 2024, despite a slight increase to 0.06 in 2024, signaling a diminished ability to cover current liabilities with cash and cash equivalents over the time frame.

Overall, the data indicates a considerable weakening of liquidity from 2020 onwards, marked by the depletion of cash assets and rising current liabilities, resulting in a persistently low cash ratio. While there is a minor improvement in cash holdings and the cash ratio in 2024, the entity still appears to face challenges in maintaining liquidity relative to its growing current liabilities.