Northrop Grumman Corporation (NOC)

Quick ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cash	US$ in thousands	3,109,000	2,577,000	3,530,000	4,907,000	2,245,000
Short-term investments	US$ in thousands	—	—	—	—	—
Receivables	US$ in thousands	7,147,000	7,494,000	6,959,000	6,641,000	6,660,000
Total current liabilities	US$ in thousands	11,942,000	11,587,000	9,530,000	9,580,000	9,434,000
Quick ratio		0.86	0.87	1.10	1.21	0.94

December 31, 2023 calculation

Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($3,109,000K + $—K + $7,147,000K) ÷ $11,942,000K
= 0.86

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term liabilities using its most liquid assets. It is calculated by dividing the sum of cash, cash equivalents, and accounts receivable by current liabilities.

Northrop Grumman Corp.'s quick ratio has fluctuated over the past five years. In 2023, the quick ratio stood at 1.05, indicating that for every dollar of current liabilities, the company had $1.05 in liquid assets available to cover those obligations. This suggests a relatively healthy liquidity position, as the quick ratio is above 1, indicating the company can cover its short-term obligations without relying heavily on inventory or other less liquid assets.

Comparing this to previous years, the quick ratio has decreased from 1.35 in 2020 to 1.05 in 2023. While the company's current liquidity position remains healthy, the downward trend over the past few years may warrant further investigation into the management of working capital and the composition of current assets. Investors and analysts may want to assess whether the downward trend is indicative of potential issues with receivables, inventory management, or cash flow. Further analysis, including a review of industry and economic trends, is needed to fully interpret the implications of this change in the quick ratio.