Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
---|---|---|---|---|---|---|
Current ratio | ||||||
Quick ratio | ||||||
Cash ratio |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of liquidity ratios over the five-year period reveals distinct trends which indicate fluctuations in short-term financial stability and cash management efficiency.
- Current Ratio
- The current ratio exhibited variability with an initial slight increase from 0.80 in 2017 to 0.85 in 2018, followed by a significant improvement to 1.97 in 2019. This peak suggests enhanced ability to cover current liabilities with current assets during that year. However, this ratio sharply declined back to 1.0 in 2020 and further to 0.75 in 2021, indicating a weakening in liquidity and possibly tighter operational cash flow or increased short-term liabilities.
- Quick Ratio
- The quick ratio demonstrated a similar trend, increasing from 0.73 in 2017 to 0.75 in 2018 and then markedly rising to 1.87 in 2019. This indicates improved immediate liquidity excluding inventories in 2019. Subsequently, the ratio declined distinctly in 2020 to 0.89 and further to 0.65 in 2021, reflecting reduced liquid asset coverage against current liabilities, aligning with the current ratio’s downward trend in the latter years.
- Cash Ratio
- The cash ratio remained very low in 2017 and 2018 (0.01 and 0.02 respectively), then prominently increased to 1.13 in 2019, showing a substantial buildup in cash or cash equivalents relative to current liabilities during that year. After this peak, the cash ratio decreased sharply to 0.16 in 2020 and further down to 0.03 in 2021, suggesting limited cash holdings available to meet short-term obligations in the final two years.
In summary, the liquidity position of the company improved markedly in 2019 as reflected by all three ratios reaching their highest points, indicating a robust short-term financial health during that period. However, this strong liquidity was not sustained, as all ratios declined notably from 2020 through 2021, pointing to a potential increase in short-term financial stress or a strategic shift in asset management that could warrant further investigation. The cash ratio’s sharp rise and fall suggest volatile cash management or fluctuations in cash reserves during these years.
Current Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
- Current Assets
- The current assets exhibited fluctuations over the analyzed periods. Initially, there was a slight increase from 2,624 million US dollars in 2017 to 2,645 million in 2018. In 2019, current assets experienced a significant rise, reaching 6,209 million. However, this peak was followed by a decline in subsequent years, dropping to 3,540 million in 2020 and further to 3,069 million in 2021. This pattern suggests variability in short-term asset holdings, with a notable peak in 2019 followed by a return to lower levels.
- Current Liabilities
- Current liabilities showed a generally upward trend throughout the period. Starting at 3,262 million US dollars in 2017, liabilities slightly decreased to 3,108 million in 2018, then gradually increased over the next three years, reaching 4,082 million by the end of 2021. The continuous rise since 2018 indicates growing short-term obligations for the company.
- Current Ratio
- The current ratio exhibited variability that reflects changes in liquidity. The ratio started below 1.0 at 0.8 in 2017 and slightly improved to 0.85 in 2018, indicating a modest enhancement in the company's capacity to cover short-term liabilities with current assets. A pronounced increase to 1.97 in 2019 suggests a strong liquidity position during that year, correlating with the peak in current assets. However, the ratio dropped significantly to 1.0 in 2020 and further to 0.75 in 2021, indicating a deterioration in liquidity and a reduced ability to meet short-term liabilities solely from current assets.
- Overall Insights
- The data indicates that the company experienced substantial variability in its short-term financial position. The peak in current assets and the current ratio in 2019 reflects a temporarily strong liquidity condition. However, the consistent increase in current liabilities coupled with the subsequent decline in both current assets and the current ratio in 2020 and 2021 signals increasing liquidity risk. The current ratio falling below 1.0 in 2021 highlights potential challenges in covering short-term obligations, suggesting that the company may need to address its working capital management to ensure short-term financial stability.
Quick Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
- Total Quick Assets
- The total quick assets exhibited significant fluctuations over the period analyzed. Initially, there was a slight decline from 2,396 million US dollars at the end of 2017 to 2,336 million US dollars in 2018. This was followed by a substantial increase, reaching 5,880 million US dollars in 2019. However, this peak was not sustained as the value decreased to 3,177 million US dollars in 2020 and further to 2,664 million US dollars by the end of 2021.
- Current Liabilities
- Current liabilities showed a generally increasing trend. Starting at 3,262 million US dollars in 2017, they dipped slightly to 3,108 million US dollars in 2018, then rose modestly to 3,144 million US dollars in 2019. This upward momentum continued with a more marked increase to 3,553 million US dollars in 2020 and further climbed to 4,082 million US dollars in 2021, indicating growing obligations due within the short term.
- Quick Ratio
- The quick ratio demonstrated a variable pattern throughout the period, closely reflecting the interplay between quick assets and current liabilities. It started below 1 at 0.73 in 2017 and showed a slight improvement to 0.75 in 2018. A pronounced spike occurred in 2019 when the ratio reached 1.87, indicating a strong short-term liquidity position during that year. Nevertheless, this ratio decreased substantially in the subsequent years to 0.89 in 2020 and further down to 0.65 in 2021, suggesting a decline in the company's immediate liquidity coverage relative to its current liabilities.
- Overall Insights
- The data indicates that the company's liquidity position strengthened significantly in 2019 but weakened thereafter. The spike in quick assets coupled with relatively stable current liabilities in 2019 resulted in a peak quick ratio, signaling robust short-term financial health. However, from 2020 onwards, the liquidity position deteriorated, with quick assets decreasing and current liabilities increasing, leading to a decline in the quick ratio. By the end of 2021, the company’s quick ratio fell below initial levels, raising concerns about its ability to cover short-term obligations solely with liquid assets.
Cash Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
- Total Cash Assets
- The total cash assets show significant volatility over the observed periods. Starting from a relatively low base of 22 million US dollars in 2017, there was a substantial increase to 61 million in 2018. This was followed by an extraordinary jump to 3,561 million in 2019, which represents a peak occurrence. Thereafter, cash assets decreased sharply to 553 million in 2020 and declined further to 118 million in 2021, indicating a strong reduction in available cash resources after the peak year.
- Current Liabilities
- Current liabilities exhibit a generally increasing trend over the five-year period. The amount rose from 3,262 million US dollars in 2017 to 3,108 million in 2018, which is a slight decrease. From 2018 onwards, current liabilities increased steadily, reaching 3,144 million in 2019, then rising more sharply to 3,553 million in 2020 and reaching the highest value of 4,082 million in 2021. This trend suggests growing short-term obligations over time.
- Cash Ratio
- The cash ratio, a liquidity measure comparing cash assets to current liabilities, fluctuated notably during the period. In 2017, the ratio was very low at 0.01, and there was a mild increase to 0.02 in 2018. A significant surge occurred in 2019 with the ratio rising to 1.13, indicating that cash assets more than covered current liabilities in that year. However, this was not sustained, as the ratio dropped back to 0.16 in 2020 and further declined to 0.03 in 2021, returning to levels close to the initial years. This pattern reflects a temporary liquidity strength in 2019 followed by a reversion to a lower cash coverage of liabilities.