HP Inc. (NYSE:HPQ)

Current Ratio

The current ratio exhibited a general decline over the assessment period. Initially, there was a slight increase from 1.11 in 2013 to 1.23 in 2015, indicating improvement in liquidity and the company's ability to cover current liabilities with current assets. However, starting in 2016, the ratio declined consistently, reaching 0.85 in 2018. This downward trend suggests a decreasing short-term financial stability and potentially tighter liquidity management.

Quick Ratio

The quick ratio followed a similar pattern to the current ratio. It increased gradually from 0.69 in 2013 to 0.80 in 2015, signifying strengthening capacity to meet immediate obligations without relying on inventory sales. However, starting in 2016, the quick ratio declined sharply, falling to 0.41 by 2018. This substantial reduction highlights a weakening in liquid asset levels relative to current liabilities, indicating increased liquidity risk.

Cash Ratio

The cash ratio showed an initial upward trend, rising from 0.27 in 2013 to 0.41 in 2015. This indicated a growing buffer of cash and cash equivalents to current liabilities during that period. After 2015, the cash ratio decreased steadily to 0.21 in 2018, reflecting a diminishing level of the most liquid assets available to cover short-term liabilities.

Current Assets

The current assets demonstrated a stable pattern with values around the 50,000 million US$ mark from 2013 to 2015. However, there was a significant decline starting in 2016, when current assets dropped sharply to 18,468 million US$. A slight increase followed in 2017 and 2018, reaching 22,318 million and 21,387 million US$ respectively, but these levels remained substantially lower than the earlier periods.

Current Liabilities

Current liabilities exhibited a steady decrease from 2013 to 2015, moving from 45,521 million US$ down to 42,191 million US$. Similar to current assets, a marked decrease occurred in 2016 to 18,808 million US$. However, unlike current assets, current liabilities increased consistently in 2017 and 2018, reaching 22,412 million and 25,131 million US$, continuing an upward trajectory.

Current Ratio

The current ratio showed a gradual improvement from 1.11 in 2013 to a peak of 1.23 in 2015, indicating a strengthening short-term liquidity position. In 2016, the ratio dropped below 1 to 0.98, signaling potential liquidity concerns. This downward trend continued through 2017 and 2018, with ratios of 1.00 and 0.85 respectively, highlighting a weakening ability to cover current liabilities with current assets over time.

Summary Insights

The financial data reveals a significant structural change beginning in 2016, with both current assets and current liabilities experiencing substantial declines. Following this period, current liabilities exhibited an increasing trend, while current assets showed only moderate recovery. The current ratio's decline below 1 from 2016 onwards suggests increasing liquidity risk, as the company may face challenges in meeting short-term obligations. The contrasting trends in current assets and liabilities post-2016 imply a potential shift in working capital management or operational adjustments affecting liquidity.

The financial data indicates several notable trends relating to liquidity and short-term financial stability over the examined period.

Total quick assets

This item showed an increasing trend from 2013 to 2015, rising from approximately 31.2 billion USD to 33.7 billion USD, suggesting an accumulation of highly liquid assets. However, there was a significant decline starting in 2016, dropping sharply to around 10.4 billion USD and remaining near that lower level through 2018. This represents a substantial reduction in quick assets, potentially affecting the company’s immediate liquidity.

Current liabilities

Current liabilities decreased moderately between 2013 and 2015, moving from about 45.5 billion USD down to 42.2 billion USD. From 2016 onward, there was a marked reduction to 18.8 billion USD in 2016, but then a steady increase followed, reaching approximately 25.1 billion USD in 2018. Although liabilities decreased compared to the first three years, the upward trend post-2016 indicates a growing short-term obligation load.

Quick ratio

The quick ratio increased slightly from 0.69 in 2013 to 0.80 in 2015, reflecting improving short-term liquidity up to that point. Starting in 2016, the ratio declined sharply to 0.55 and continued to fall to 0.41 by 2018. This downward trend highlights a diminishing ability to cover current liabilities with quick assets, signifying increasing liquidity risk.

Overall, the period from 2013 to 2015 exhibited strengthening liquidity positions, with growing quick assets and a rising quick ratio. Conversely, the period after 2015 saw a pronounced decrease in quick assets, coupled with a substantial drop in the quick ratio and a recovery in current liabilities, suggesting reduced liquidity and heightened short-term financial pressure.

Total Cash Assets

The total cash assets displayed an overall declining trend during the analyzed periods. Starting from 12,163 million USD in 2013, cash assets increased steadily to reach a peak of 17,433 million USD in 2015. However, following this peak, there was a sharp decline in 2016 to 6,288 million USD, with minor fluctuations thereafter, ending at 5,166 million USD in 2018. This suggests a significant reduction of liquid assets held by the company after 2015.

Current Liabilities

Current liabilities showed a continuous decreasing trend from 45,521 million USD in 2013 to 18,808 million USD in 2016. After 2016, liabilities increased again to 25,131 million USD by 2018. The initial decline implies a reduction in short-term obligations or stronger management of liabilities until 2016, followed by an increase which may indicate a rise in short-term debt or other obligations post-2016.

Cash Ratio

The cash ratio, representing the proportion of cash assets to current liabilities, started at 0.27 in 2013 and increased to 0.41 by 2015, reflecting improved liquidity position. However, after 2015, the ratio declined consistently to 0.21 by 2018, indicating a reduced capacity to cover short-term liabilities with cash and cash equivalents. The decline corresponds with the reduction in total cash assets and the increase in current liabilities post-2015.