Analysis of Liquidity Ratios
Quarterly Data
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
Generac Holdings Inc., liquidity ratios (quarterly data)
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
The analysis of the liquidity ratios over the observed period highlights several noteworthy trends and shifts in the company's short-term financial stability.
- Current Ratio
- The current ratio demonstrates fluctuations throughout the timeframe, beginning at 2.15 in March 2017 and peaking around 2.66 during mid to late 2020. This peak reflects a relatively strong capacity to cover short-term liabilities with current assets. However, a downward trend is observed in 2021, reaching a low of 1.6 in December 2021, before recovering slightly to 2.13 in June 2022. The fluctuations suggest variable management of working capital or changes in current liabilities and assets, with a notable dip in late 2021 indicating potential liquidity pressure during that period.
- Quick Ratio
- The quick ratio, which excludes inventory from current assets, follows a pattern broadly consistent with the current ratio but with generally lower values, as expected. Starting at 0.89 in March 2017, it peaks at 1.64 in September 2020, implying increased liquidity in liquid assets during that time. Similar to the current ratio, it experiences a decline in 2021, reaching its lowest point at 0.6 in March 2022, then showing modest recovery to 0.99 by June 2022. This drop highlights a significant reduction in the ability to meet short-term obligations without relying on inventory, suggesting tighter liquidity conditions in this period.
- Cash Ratio
- The cash ratio, the most conservative measure of liquidity focusing on cash and cash equivalents, remains relatively low throughout but exhibits a rising trend from 0.18 in March 2017 to a high of 1.05 in June 2021. This trend indicates improving cash reserves relative to current liabilities through mid-2021. Following the peak, there is a steep decline to 0.13 in March 2022, signaling a substantial reduction in cash holdings, which could raise concerns about immediate liquidity. The partial recovery to 0.4 in June 2022 suggests an effort to rebuild cash buffers.
Overall, the liquidity profile over the periods analyzed shows an improvement in short-term financial flexibility through 2020 and mid-2021, with all three ratios reaching local maxima, especially in the context of cash reserves. However, the year 2021 into early 2022 witnesses a decline across all liquidity measures, reflecting possible operational or market challenges impacting available assets and cash. The partial recovery toward the middle of 2022 implies adjustments or transient conditions affecting liquidity.
Current Ratio
Generac Holdings Inc., current ratio calculation (quarterly data)
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | ||||||||
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| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||||||
| Liquidity Ratio | |||||||||||||||||||||||||||||
| Current ratio1 | |||||||||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||||||||
| Current Ratio, Competitors2 | |||||||||||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
1 Q2 2022 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals notable trends in the liquidity position of the entity from March 2017 through June 2022. The focus is on current assets, current liabilities, and the resulting current ratio, which measures short-term financial health.
- Current Assets
- Current assets exhibit a general upward trend over the analyzed periods. Starting at approximately $681 million in March 2017, the figure increased progressively, reaching around $2.49 billion by June 2022. This growth reflects an expanding resource base available for meeting short-term obligations.
- Current Liabilities
- Current liabilities also increased over the same timeframe but at a less consistent pace. Beginning near $316 million in March 2017, the liabilities rose to about $1.17 billion by June 2022. Despite fluctuations, the upward trajectory in liabilities appears to be less steep than that of current assets.
- Current Ratio
- The current ratio showed variability but generally indicated a solid liquidity position through most quarters. It began at 2.15 in March 2017, fluctuated between approximately 1.6 and 2.66 across various quarters, and stood at 2.13 in June 2022. Higher values above 2 during multiple quarters suggest the entity maintained a comfortable buffer of current assets over current liabilities, though a decline toward the later quarters signals some tightening of liquidity.
- Overall Trends and Insights
- The consistent increase in current assets outpacing the growth in current liabilities is a positive indicator of the entity's capacity to meet short-term obligations. The current ratio's stability around or above 2 across multiple periods confirms a generally prudent liquidity management. The dip in the current ratio during late 2021 and early 2022 warrants attention; it may indicate either a rapid increase in current liabilities or a slower growth in current assets. Following this, the rebound to above 2 in June 2022 suggests recuperation in liquidity position.
Quick Ratio
Generac Holdings Inc., quick ratio calculation (quarterly data)
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||||||||
| Accounts receivable, less allowance for credit losses | |||||||||||||||||||||||||||||
| Total quick assets | |||||||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||||||
| Liquidity Ratio | |||||||||||||||||||||||||||||
| Quick ratio1 | |||||||||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||||||||
| Quick Ratio, Competitors2 | |||||||||||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
1 Q2 2022 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The financial data reveals several notable trends in the company’s liquidity position and short-term obligations over the analyzed periods.
- Total Quick Assets
-
Total quick assets exhibit a general upward trajectory from March 2017 through mid-2021, rising from $280.5 million to a peak of approximately $1.17 billion in March 2021. This represents a significant accumulation of liquid assets over the four-year span. However, following the peak, there is a visible decline in quick assets, dropping to about $693.8 million by March 2022 before a subsequent rise to $1.16 billion by June 2022. The fluctuations indicate periods of asset reallocation or liquidity management adjustments.
- Current Liabilities
-
Current liabilities increased steadily over the periods, beginning at approximately $315.9 million in March 2017 and rising to a peak of $1.25 billion by June 2022. The growth is relatively consistent with minor short-term variations. Notably, liabilities showed pronounced increases during 2021 and into 2022, outpacing earlier rates of growth. This suggests heightened short-term financial commitments or operational scaling activities.
- Quick Ratio
-
The quick ratio shows variability reflecting the interplay between quick assets and current liabilities. Initially, it remained near or above unity until the end of 2017, peaking slightly above 1.2 in late 2019 and reaching the highest point of roughly 1.65 in late 2020 and early 2021. This peak suggests a strong liquidity position relative to short-term obligations during that interval. However, after early 2021, the quick ratio declined sharply, falling below 1.0 in late 2021 and reaching as low as 0.6 in early 2022 before recovering to 0.99 by mid-2022. This decrease indicates pressures on liquidity, possibly driven by the faster growth of current liabilities compared to quick assets during this period.
Overall, the data reflects a company that grew its liquid assets substantially up to early 2021, maintaining a healthy quick ratio during this growth. Post-2021, rising current liabilities outpaced quick assets growth, reducing the quick ratio and indicating tighter short-term liquidity conditions which were only partially ameliorated by mid-2022. This could signal increased operational demands, investment activity, or potential shifts in working capital management strategy.
Cash Ratio
Generac Holdings Inc., cash ratio calculation (quarterly data)
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||||||||
| Total cash assets | |||||||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||||||
| Liquidity Ratio | |||||||||||||||||||||||||||||
| Cash ratio1 | |||||||||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||||||||
| Cash Ratio, Competitors2 | |||||||||||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
1 Q2 2022 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several noteworthy trends in liquidity and short-term obligations over the observed periods.
- Total Cash Assets
- Total cash assets exhibit significant fluctuations but with an overall upward trajectory from 2017 through early 2021, peaking at $744.8 million in March 2021. The amount started at approximately $57.5 million in March 2017, increased steadily to over $655 million by December 2020, reflecting a strong accumulation of cash resources. However, there is a notable sharp decline starting in June 2021, dropping to $390.1 million, with cash levels remaining volatile but generally much lower compared to the peak period, reaching a low of $147.3 million in December 2021 before partially recovering to $467.1 million by June 2022.
- Current Liabilities
- Current liabilities consistently increased over the period, indicating growing short-term financial obligations. Beginning at approximately $315.9 million in March 2017, liabilities rose steadily to reach over $1.15 billion by June 2022, with only minor fluctuations. Noteworthy acceleration in liabilities is observable from mid-2020 onward, with liabilities roughly doubling from $556.3 million in December 2020 to over $1.15 billion by mid-2022.
- Cash Ratio
- The cash ratio, representing the ability to cover current liabilities using cash and cash equivalents, fluctuates considerably. Early periods show improvement from 0.18 in March 2017 to a peak ratio of 1.05 by June 2021, suggesting enhanced liquidity and capacity to cover short-term debts fully with cash. However, a sharp deterioration follows immediately after, with the ratio plunging to as low as 0.13 by December 2021, indicating a significant loss of liquidity relative to current liabilities. There is a slight recovery to 0.40 by June 2022, but the ratio remains below earlier peak levels.
In summary, the data indicates that while the company built a strong cash position relative to its short-term liabilities up to mid-2021, this liquidity strength was substantially eroded in the subsequent quarters. Concurrently, current liabilities increased markedly, compounding liquidity pressure. The cash ratio’s volatility underscores a period of financial strain or strategic cash deployment, warranting further investigation into the causes behind these liquidity shifts and how they might impact operational or financial stability going forward.