Advanced Micro Devices Inc. (NASDAQ:AMD)

The financial ratios presented indicate the liquidity position of the company over a series of quarterly periods. The analysis focuses on three key liquidity metrics: the current ratio, quick ratio, and cash ratio. Each ratio provides insight into the company's ability to meet short-term obligations through various levels of asset liquidity.

Current Ratio

The current ratio shows a pattern of moderate fluctuation within a relatively stable range over the quarters. Starting at 2.51 in the first quarter, it experienced slight rises and dips, reaching a low near 2.02 before trending upward again towards the later periods, peaking around 2.82, and finishing near 2.49. Overall, this suggests the company consistently maintained a strong ability to cover current liabilities with current assets, with slight variations likely attributable to seasonal factors or operational changes.

Quick Ratio

The quick ratio follows a trend somewhat parallel to the current ratio but presents more pronounced volatility. Initially at 1.85, it rose gently before dropping to a low near 1.4 in mid-periods, recovered towards 1.79, and then declined again towards the end, reaching as low as 1.12. This fluctuation points to changes in the composition of current assets, particularly those that are not inventory, indicating fluctuating liquidity reserves without depending heavily on inventory sales.

Cash Ratio

The cash ratio displays the most variability and generally lower figures compared to the other two ratios, beginning at 1.09 and fluctuating between approximately 0.6 and 1.31. Notably, the ratio shows a downward trend in several periods, finishing closer to 0.6. This suggests that the company's most liquid assets, such as cash and cash equivalents, were relatively less abundant compared to current liabilities at times, which could imply strategic cash management or investment activities impacting immediate cash availability.

In summary, the company maintains a solid liquidity position as indicated by the current ratio consistently above 2. The quick ratio's volatility reflects varying short-term asset liquidity, while the cash ratio's downward tendency toward the later quarters implies a more conservative cash holding approach or greater operational cash use. Collectively, these trends highlight the company's capacity to meet short-term obligations but signal variability in the immediate availability of liquid resources.

The analysis of the quarterly financial data reveals notable trends in the company's liquidity position over the observed periods.

Current Assets

Current assets show a consistent upward trajectory throughout the periods. Starting at 7,197 million US dollars, they increased steadily with occasional accelerated growth phases, notably between the end of 2020 and early 2022, and again from early 2024 onwards. By the latest quarter, current assets reached approximately 24,519 million US dollars, indicating a significant strengthening of short-term resources available to the company.

Current Liabilities

Current liabilities also generally increased over time, albeit with more fluctuations compared to current assets. Beginning at 2,864 million US dollars, liabilities rose steadily through most quarters, peaking at 9,843 million US dollars in the last period reported. There were intermittent periods of decline or stabilization, particularly around the transition from the end of 2022 to early 2024, suggesting some efforts in managing short-term obligations. However, the overall increase reflects growing obligations that accompany the asset growth and potential operational expansion.

Current Ratio

The current ratio, representing the company's ability to cover current liabilities with current assets, generally remained above the threshold of 2.0, which is often considered indicative of a comfortable liquidity buffer. The ratio fluctuated over the periods, showing declines in some quarters (e.g., dropping to 2.02 in late 2021) but improving in others, reaching peaks around 2.82 in mid-2024. Towards the end of the series, the current ratio settled near 2.49, still reflecting a strong liquidity position.

Overall, the data indicates that the company has maintained solid liquidity, with current assets growing at a faster pace than current liabilities. Although current liabilities have increased, the current ratio suggests that the company has preserved adequate short-term financial stability throughout the analyzed quarters.

The analysis of the quarterly financial metrics reveals several notable trends in liquidity and short-term financial stability over the observed periods.

Total Quick Assets

There is a general upward trajectory in total quick assets from the beginning to the later quarters. Starting around 5,294 million USD, the value increased substantially to over 12,753 million USD by the quarter ending March 29, 2025, peaking intermittently with occasional minor declines. This indicates a strengthening in the company's liquid assets over time with minor fluctuations, suggesting an overall improvement in immediate asset availability for meeting short-term obligations.

Current Liabilities

Current liabilities show a rising trend parallel to the increase in quick assets, growing from approximately 2,864 million USD to a peak of 9,843 million USD in June 2025. The trend depicts intensified short-term obligations, with marked increases in certain quarters, particularly in the latter half of the timeline, pointing to potentially increased operational scale or shifts in payment cycles. This rise in liabilities alongside assets highlights a balance in growth of the company's financial commitments and liquidity.

Quick Ratio

The quick ratio exhibits variability over time, generally oscillating between approximately 1.1 and 2.0. Early periods start strong, exceeding 1.8, then experience declines near 1.4 to 1.5 in certain quarters, followed by periods of recovery to around 1.7 or higher. However, the ratio trends downward again towards the end of the timeline, falling to about 1.12 in June 2025. This downward movement could signal a reduction in the buffer of liquid assets relative to current liabilities, suggesting increasing pressure on liquidity management despite overall asset growth.

In summary, there is a consistent increase in total quick assets and current liabilities over the quarters, indicating growth in business scale and financial activities. The quick ratio’s fluctuations show varying levels of liquidity strength, with a notable decline in the most recent period that may warrant attention to maintain adequate short-term financial health. The company appears to manage expanding liabilities with corresponding increases in quick assets, though the narrowing quick ratio highlights a potential area for enhanced liquidity oversight going forward.

Total Cash Assets

The total cash assets exhibited fluctuations over the observed periods, starting at $3,116 million and showing a general upward movement through 2022, peaking at $6,532 million in March 2022. Afterward, a gradual decline followed, dropping to a low point around mid-2024 at approximately $4,544 million. The cash assets then increased substantially again by March 2025, reaching $7,310 million before seeing a decrease by June 2025 to $5,867 million. Overall, the trend indicates periods of cash accumulation punctuated by phases of reduction, suggesting variable liquidity management or investment activity throughout the timeframe.

Current Liabilities

Current liabilities consistently increased over the examined quarters, rising from $2,864 million in March 2021 to $9,843 million in June 2025. There were steady increments with notable surges in the second half of 2021 and continuing growth into 2022 and beyond. This persistent rise in short-term obligations could indicate increased operational financing needs, higher payables, or accruals over time, reflecting pressure on liquidity and the need for efficient working capital management.

Cash Ratio

The cash ratio showed considerable variability, indicating fluctuating liquidity relative to current liabilities. Initially, the ratio was above 1.0 at 1.09 in March 2021 and peaked at 1.31 in June 2021, suggesting strong liquidity. However, it then declined markedly, falling below 1.0 for most subsequent quarters, reaching as low as 0.60 in June 2025. This downward trend in the cash ratio corresponds with the increasing current liabilities and relatively less substantial increases or decreases in cash assets. The ratio's decline below 1.0 indicates that cash reserves alone would not fully cover current liabilities in many quarters, hinting at broader liquidity risks or reliance on other current assets or financing sources.

Summary Insights

The financial data reveal a company experiencing growth in current liabilities that outpaces the accumulation of cash assets over time. The cash assets show cyclical increases and decreases, but the trend does not keep pace with the rising short-term obligations. Consequently, the cash ratio declines, signaling potentially reduced cash coverage of short-term liabilities, which may warrant closer monitoring of liquidity management practices. The variation in cash holdings might reflect strategic cash management decisions, while the steady rise in liabilities suggests increased operational or financial commitments. These dynamics highlight the importance of balancing liquidity and obligations to maintain financial stability.