Waste Management Inc. (NYSE:WM)

Current Ratio Trend

The current ratio exhibited fluctuations over the observed periods. Initially, it remained below 1.0 for the early 2018 quarters, indicating limited short-term liquidity relative to current liabilities. A marked improvement is observed from the second quarter of 2019 through the end of that year, reaching a peak near 1.97, which suggests enhanced ability to cover short-term obligations. However, beginning in 2020, the ratio declined again, falling below 1.0 by the end of 2020 and remaining below 1.0 throughout 2021, signaling a potential decrease in liquidity cushion during this time frame.

Quick Ratio Trend

The quick ratio followed a similar pattern to the current ratio, reflecting the company's immediate liquidity without inventory. It stayed under 1.0 in early 2018, with a decrease noted at the start of 2019 reaching as low as 0.59. A significant rise occurred in mid to late 2019, peaking at 1.87, indicating improved liquidity from liquid assets. However, from 2020 onwards, this ratio decreased once more, falling back below 1.0 by the end of 2020 and continuing on a downward trajectory through 2021, suggesting reduced availability of quick assets to meet short-term liabilities in the most recent periods.

Cash Ratio Trend

The cash ratio showed the most variability and lowest values among the three liquidity measures. From 2018 through early 2019, it remained very low, around 0.01 to 0.03, indicating minimal cash or cash equivalents relative to current liabilities. A sharp increase occurred in mid-2019, rising to highs above 1.0 by the last quarter of 2019, implying a substantial boost in cash holdings or highly liquid assets for that period. Subsequently, the cash ratio steadily decreased throughout 2020 and 2021, dropping back down to values between 0.03 and 0.16 by the end of 2021. This trend indicates a reduction in cash reserves relative to current liabilities after the peak in late 2019.

Overall Liquidity Insights

Collectively, the liquidity ratios suggest a period of improved short-term financial health and liquidity in mid to late 2019, with enhanced coverage of current liabilities by assets, particularly cash and equivalents. However, the subsequent decline across all three ratios in 2020 and 2021 highlights potential challenges in maintaining liquidity levels. The downward trend might reflect increased liabilities, decreased liquid assets, or other operating factors impacting liquidity. This pattern calls attention to potential liquidity risk management concerns in the more recent periods.

The analysis of the quarterly financial data reveals notable fluctuations in both current assets and current liabilities, which in turn impact the current ratio throughout the periods.

Current Assets

Current assets generally showed an upward trend from the beginning of 2018 through the end of 2019, increasing from approximately 2,491 million USD in the first quarter of 2018 to a peak of around 6,209 million USD at the end of 2019. However, starting in 2020, current assets demonstrated volatility with a decline in mid-2020 to 3,357 million USD followed by a modest recovery toward the end of 2020. In 2021, current assets gradually decreased again, moving from 3,327 million USD to 3,069 million USD by the last quarter. This pattern indicates periods of substantial asset growth until late 2019, followed by contraction and stabilization at a lower level during 2020 and 2021.

Current Liabilities

Current liabilities exhibited considerable variation across the quarters. There was a decline from 3,373 million USD in early 2018 to 2,846 million USD by mid-2019, followed by a steady increase that culminated in a peak of 5,772 million USD in the second quarter of 2020. Subsequently, liabilities fluctuated but remained generally elevated relative to earlier periods, ending 2021 at 4,082 million USD. This increase in liabilities, particularly the sharp jump in mid-2020, suggests higher short-term obligations during that period, which could be indicative of changes in operational financing or external pressures.

Current Ratio

The current ratio, an indicator of short-term liquidity, changed markedly over time. Initially, the ratio was below 1, ranging from 0.74 to 0.87 during 2018, implying current liabilities exceeded current assets. A significant improvement occurred in 2019 when the ratio rose sharply, peaking near 1.97 at the end of 2019, reflecting increased liquidity and a stronger buffer of current assets over liabilities. However, this improvement was not sustained; the ratio experienced a sharp decline in the first half of 2020 back to below or around 1, coinciding with the spike in current liabilities and decrease in current assets. For the remainder of 2020 and throughout 2021, the ratio remained close to or below 1, oscillating between 1.20 and 0.75. This indicates a decline in short-term financial health and reduced ability to cover current liabilities with current assets during these periods.

In summary, the company experienced significant growth in current assets and improved liquidity through 2019, followed by increased short-term liabilities and diminished liquidity starting in 2020. The fluctuations in financial ratios suggest varying financial pressures and adjustments to working capital management, with a more constrained liquidity position prevailing in the most recent quarters.

Total Quick Assets

The total quick assets demonstrated variability throughout the periods analyzed. Initially, values hovered around the mid-2000s in millions of US dollars, with a notable increase starting in the second quarter of 2019, peaking at 5,880 million by the end of 2019. Following this peak, a decline is observed through 2020 and 2021, with values decreasing to approximately 2,664 million by the end of 2021. This pattern highlights a period of significant asset growth followed by a notable contraction.

Current Liabilities

Current liabilities show a fluctuating trend without a clear directional pattern. Early periods display liabilities roughly in the 3,000-3,600 million range, with a sharp increase observed in the second quarter of 2020, reaching 5,772 million US dollars. Following this spike, liabilities again fluctuate between approximately 2,800 and 4,100 million through 2021. This indicates episodic variations in short-term obligations, with a significant temporary peak in mid-2020.

Quick Ratio

The quick ratio reflects the company's short-term liquidity position and shows considerable fluctuation over the reported periods. Initially below 1.0, the ratio declines to a low of 0.59 in the first quarter of 2019. It then increases substantially, reaching a high of 1.87 by the end of 2019, indicating improved liquidity driven by the rise in quick assets relative to current liabilities. However, this is followed by a decline throughout 2020 and 2021, with the ratio falling back below 1.0, reaching 0.65 by the end of 2021. This suggests decreasing liquidity and potential tightening of the company's short-term financial position in the later periods.

Summary

The analyzed data reveal a period of enhanced liquidity and asset growth during 2019, as evidenced by rising total quick assets and an improving quick ratio. The spike in current liabilities in mid-2020 appears to have impacted liquidity adversely, contributing to the subsequent decline in the quick ratio despite some fluctuations in total quick assets. The overall trend toward the end of the series indicates a contraction in quick assets and increased short-term liabilities, resulting in a weakening liquidity position by the end of 2021.

The financial data reveals notable fluctuations in the company's liquidity and current liabilities over the observed periods.

Total Cash Assets

The total cash assets experienced moderate values from early 2018 through the first quarter of 2019, generally ranging between $47 million and $83 million. There was a significant surge starting in mid-2019, peaking at $3,561 million at the end of 2019. This spike reflects a major accumulation of cash resources during this period. However, following this peak, a sharp decline is evident throughout 2020 and into 2021, with cash assets falling to levels below $150 million by the end of 2021. The trend indicates a substantial liquidity positioning improvement in mid-2019, followed by a notable drawdown or utilization of cash assets in subsequent periods.

Current Liabilities

Current liabilities exhibit variability without a clear consistent direction but show distinct jumps in certain quarters. Initially, they hovered around the $3,000 to $3,600 million range until early 2020. In the second quarter of 2020, liabilities abruptly increased to $5,772 million, almost doubling compared to the previous quarter, indicating a sudden rise in short-term obligations. After this spike, current liabilities decreased back to approximately $2,800–3,500 million for the remaining periods, before gradually rising again toward the end of 2021, reaching above $4,000 million. This pattern suggests episodic increases in obligations potentially linked to operational or financing activities.

Cash Ratio

The cash ratio, representing the ability to cover current liabilities with cash assets, mirrors the trends seen in cash and liabilities. From 2018 through early 2019, the ratio was very low, generally between 0.01 and 0.03, indicating limited immediate liquidity relative to liabilities. Beginning mid-2019, the ratio rose dramatically to levels close to or above 1.0, peaking at 1.13 at the end of 2019. This suggests that cash assets were sufficient to cover current liabilities fully during this period. Post-peak, the cash ratio decreased steadily, returning to much lower levels (0.03–0.16) by the end of 2021, indicating reduced liquidity coverage and potentially tighter short-term financial conditions.

In summary, the company experienced a significant improvement in liquidity around mid to late 2019, with increased cash reserves and a favorable cash ratio exceeding 1.0, indicating strong short-term financial health at that time. However, this position was not sustained, as evidenced by the sharp decline in cash assets and cash ratio throughout 2020 and 2021, alongside fluctuating current liabilities. The large spike in current liabilities in mid-2020 may reflect extraordinary operational or financial factors during that period, possibly associated with broader economic conditions. Overall, the pattern points to a period of liquidity strengthening followed by a gradual erosion of cash reserves and decreased short-term financial flexibility in the most recent quarters.