Freeport-McMoRan Inc. (NYSE:FCX)

The analysis of the financial liquidity ratios over the five-year period reveals several notable trends in the company's short-term financial health and ability to meet its obligations.

Current Ratio

The current ratio has shown a gradual decline from 2.72 in 2020 to 2.42 in both 2023 and 2024. This indicates a slight reduction in the company's ability to cover its current liabilities with current assets over time, though the ratio remains above 2, suggesting reasonably strong liquidity.

Quick Ratio

The quick ratio exhibits a more fluctuating pattern. It increased from 1.48 in 2020 to a peak of 1.66 in 2021, followed by a decline to 1.58 in 2022, then a sharper drop to 1.31 in 2023, and further to 1.08 in 2024. This trend points toward a decreasing portion of liquid assets excluding inventory that can immediately cover current liabilities, implying a tightening of more readily available liquidity.

Cash Ratio

Similarly, the cash ratio increased from 1.07 in 2020 to 1.37 in 2021, followed by a decline to 1.3 in 2022, then a more pronounced decrease to 1.03 in 2023 and further down to 0.88 in 2024. This suggests a diminishing amount of the most liquid assets, primarily cash and cash equivalents, relative to current liabilities over the later years.

Overall, the pattern across the three liquidity measures signals a downward trend in the most liquid asset availability relative to liabilities, especially from 2021 onwards. While the company maintained a strong liquidity position at the beginning of the period, there is evidence of gradually decreasing liquidity buffers in recent years. This could warrant attention regarding short-term financial flexibility and cash management strategies moving forward.

The analysis of the financial data over the five-year period reveals several notable trends in the company's liquidity position and short-term financial stability.

Current Assets

Current assets exhibit a significant increase from 2020 to 2022, rising from $9,303 million to a peak of $15,613 million, indicating a growing asset base available for meeting short-term obligations. However, after 2022, current assets show a declining trend, falling to $13,296 million by 2024. This reduction could imply either the utilization of current assets for operational or investment purposes or potential challenges in asset accumulation.

Current Liabilities

Current liabilities demonstrate a substantial increase from $3,417 million in 2020 to $6,345 million in 2022, almost doubling over this period. Subsequently, liabilities decrease to $5,496 million in 2024. The initial rise suggests increased short-term obligations, possibly linked to heightened operational activity or financing needs, while the later decline indicates efforts to reduce short-term debt or obligations.

Current Ratio

The current ratio decreases gradually from 2.72 in 2020 to 2.42 in 2024, reflecting a slight deterioration in liquidity over time. Despite this decline, the ratio remains above the commonly accepted benchmark of 1.0, suggesting adequate short-term financial health. The gradual decrease aligns with the observed trends in current assets and liabilities, indicating that liabilities have grown at a faster pace relative to assets, reducing the margin of safety in covering short-term debts.

Overall, the data depicts a period of asset and liability growth followed by a modest consolidation phase. The decline in current assets coupled with the reduction in current liabilities moderates the liquidity ratio, signaling a more conservative short-term financial posture in the latter years. Although liquidity metrics have slightly weakened, they still indicate reasonable capacity to meet short-term obligations.

Total quick assets

The value of total quick assets increased significantly from 5069 million USD in 2020 to a peak of 10052 million USD in 2022. However, after 2022, there was a notable decline, with quick assets decreasing to 7630 million USD in 2023 and further to 5953 million USD by the end of 2024. This indicates a period of asset accumulation followed by a sustained reduction over the last two years observed.

Current liabilities

Current liabilities showed a rising trend from 3417 million USD in 2020, escalating to 6345 million USD in 2022. Subsequently, liabilities began to decline gradually, falling to 5815 million USD in 2023 and then to 5496 million USD in 2024. This pattern suggests an increase in short-term obligations through 2022 followed by a conservative approach to managing liabilities in the last two years.

Quick ratio

The quick ratio demonstrated an initial improvement from 1.48 in 2020 to a peak of 1.66 in 2021, reflecting enhanced short-term liquidity. Following this, the ratio declined steadily to 1.58 in 2022, then more sharply to 1.31 in 2023, and further down to 1.08 in 2024. Despite remaining above 1.0, this downward trend indicates a weakening ability to cover current liabilities with liquid assets, suggesting increased liquidity risk over the most recent years.

The financial data reveals several notable trends and shifts over the five-year period ending December 31, 2024.

Total Cash Assets

There is a marked increase in total cash assets from 2020 to 2022, rising from 3,657 million US dollars to 8,257 million US dollars, indicating a strengthening liquidity position during this period. However, a decline is observed in subsequent years, dropping to 5,966 million US dollars in 2023 and further to 4,811 million US dollars by the end of 2024. This suggests a reduction in cash reserves after peaking in 2022.

Current Liabilities

Current liabilities show a consistent increase from 3,417 million US dollars in 2020 to a peak of 6,345 million US dollars in 2022. Following this peak, liabilities begin to decrease, reaching 5,815 million US dollars in 2023 and falling to 5,496 million US dollars in 2024. The overall trend shows growing short-term obligations initially followed by a gradual reduction.

Cash Ratio

The cash ratio, which measures the company’s ability to cover its short-term liabilities with its cash assets, improved from 1.07 in 2020 to a peak of 1.37 in 2021. It slightly decreased to 1.30 in 2022 but remained above 1, indicating good liquidity during these years. From 2023 onwards, the ratio declines significantly to 1.03 and then below 1 to 0.88 in 2024, suggesting a weakening liquidity position and implying the company’s cash reserves are becoming insufficient to fully cover its current liabilities by the end of the period.

Overall, the data points to a period of liquidity strengthening up to 2022, followed by a contraction in cash assets and a reduction in liquidity ratios, raising potential concerns about short-term financial stability in the most recent years.