Apple Inc (AAPL)
Liquidity ratios
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 0.99 | 0.88 | 1.07 | 1.36 | 1.54 |
| Quick ratio | 0.84 | 0.71 | 0.91 | 1.22 | 1.38 |
| Cash ratio | 0.42 | 0.31 | 0.50 | 0.86 | 0.95 |
The liquidity ratios provide insights into a company's ability to meet its short-term obligations using its current assets. Let's analyze the liquidity ratios of Apple Inc over the past five years:
1. Current Ratio:
The current ratio measures the ability of a company to meet its short-term liabilities using its current assets. A higher current ratio is generally favorable. Apple's current ratio has decreased from 1.54 in 2019 to 0.99 in 2023. This decline indicates a reduction in the company's ability to cover its short-term obligations with its current assets. It is important to note that while a ratio above 1.0 suggests that a company can pay its current liabilities, a ratio of less than 1.0 may indicate potential difficulty in meeting short-term obligations.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. Apple's quick ratio has also exhibited a decreasing trend, falling from 1.50 in 2019 to 0.94 in 2023. This indicates a decreasing ability to meet short-term obligations with the most liquid current assets.
3. Cash Ratio:
The cash ratio measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. Apple's cash ratio has followed a decreasing trend, dropping from 1.07 in 2019 to 0.52 in 2023. This indicates a declining ability to pay off short-term liabilities with its readily available cash.
Overall, the declining trend in Apple's liquidity ratios over the past five years raises concerns about the company's ability to cover its short-term obligations with its current assets effectively. It would be imperative to closely monitor these ratios in the coming periods to assess any further impact on Apple's financial liquidity and working capital management.
See also:
Additional liquidity measure
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -27.25 | -30.04 | -23.09 | -23.34 | -20.26 |
The cash conversion cycle (CCC) is a crucial measure of a company's efficiency in managing its working capital, which includes inventory, accounts receivable, and accounts payable. A negative CCC indicates that the company is able to generate cash from its operational activities before having to pay its suppliers, which is a positive sign.
Looking at the data provided for Apple Inc, the trend in the cash conversion cycle from 2019 to 2023 shows a consistent improvement. In 2019, the CCC was -30.79 days, suggesting that Apple was able to convert its inventory and receivables into cash and pay its suppliers within approximately one month.
Over the next few years, this efficiency in managing working capital continued to improve. By 2023, the cash conversion cycle had reduced further to -37.85 days, indicating that Apple was able to convert its resources into cash even more rapidly.
Such a trend suggests that Apple has been effectively managing its inventory, receivables, and payables, resulting in a shorter cash conversion cycle and improved cash flow. This efficient working capital management can contribute to the company's overall financial health and stability.
It is worth noting that a negative CCC, although advantageous, should be assessed in conjunction with other financial metrics to gain a comprehensive understanding of Apple's operational and financial performance. Nonetheless, the positive trend in Apple's cash conversion cycle over the years indicates a continued improvement in its working capital management.