Johnson Controls International plc (NYSE:JCI)

Current ratio

The current ratio displayed an overall declining trend from 2019 to 2023. After peaking at 1.37 in 2019, it decreased progressively through the years, reaching 0.97 in 2023, which is below the initial 2018 value of 1.05. This decline indicates a reduction in the company's short-term liquidity position over the analyzed period.

Quick ratio

The quick ratio followed a similar pattern to the current ratio, increasing from 0.65 in 2018 to a peak of 0.95 in 2019. Post-2019, it experienced a downward trend, falling to 0.62 in 2023. This suggests a weakening in the company’s ability to cover its immediate liabilities without relying on inventory sales.

Cash ratio

The cash ratio improved significantly from a very low base of 0.02 in 2018 to 0.31 in 2019, indicating a substantial increase in cash or cash equivalents relative to current liabilities in that year. However, from 2019 onwards, the ratio declined sharply, falling to 0.08 by 2023. This decline points to decreasing availability of cash assets for meeting short-term liabilities, potentially signaling tightening liquidity.

The analysis of the annual financial data reveals several notable trends related to liquidity and short-term financial health over the six-year period.

Current Assets

Current assets exhibit some fluctuation throughout the years. Starting at 11,823 million USD in 2018, they rose to a peak of 12,393 million USD in 2019 before experiencing a decline to 9,998 million USD in 2021. A partial recovery follows, with current assets increasing to 11,685 million USD in 2022, then declining again to 10,737 million USD in 2023. Overall, the asset values show variability without a clear upward or downward long-term trend.

Current Liabilities

Current liabilities demonstrate a generally decreasing trend from 2018 to 2020, falling from 11,250 million USD to 8,248 million USD. However, liabilities increased significantly in 2021 to 9,098 million USD and surged again to exceed their initial levels in 2022 and 2023, reaching 11,239 and 11,084 million USD respectively. This rise in liabilities in the later years indicates increased short-term obligations.

Current Ratio

The current ratio, an indicator of short-term liquidity, shows a downward trend over the period. After improving to 1.37 in 2019 from 1.05 in 2018, it declined to 1.22 in 2020, then continued a downward trajectory to 1.10 in 2021 and close to parity at 1.04 in 2022, finally dropping below 1.0 to 0.97 in 2023. This decline suggests a deterioration in the company's ability to cover short-term liabilities with current assets, potentially signaling tighter liquidity conditions.

In summary, the company’s current assets and liabilities have fluctuated over the years, but the overall liquidity position, as reflected by the current ratio, has weakened, especially in the most recent year. The combination of rising current liabilities and fluctuating current assets has contributed to this decline. Careful attention to managing current liabilities and improving asset levels could be important for maintaining short-term financial stability going forward.

Total quick assets

The total quick assets demonstrated variability over the analyzed periods. From September 2018 to September 2019, there was a notable increase from 7,265 million USD to 8,575 million USD. However, this was followed by a decline to 7,245 million USD in 2020 and a further decrease to 6,949 million USD in 2021. The figure rebounded somewhat to 7,559 million USD in 2022 before decreasing again to 6,841 million USD in 2023. Overall, the total quick assets showed fluctuations with a general downward trend after 2019.

Current liabilities

Current liabilities exhibited a downward trend initially, decreasing from 11,250 million USD in 2018 to a low of 8,248 million USD in 2020. After 2020, liabilities increased significantly, rising to 9,098 million USD in 2021 and then sharply up to 11,239 million USD in 2022. In 2023, current liabilities slightly decreased to 11,084 million USD. This pattern indicates a period of reduced current liabilities followed by a return to higher levels comparable to those in 2018.

Quick ratio

The quick ratio followed a similar fluctuating pattern. Starting at 0.65 in 2018, it rose markedly to 0.95 in 2019, indicating improved short-term liquidity. Subsequently, it decreased to 0.88 in 2020 and further declined to 0.76 in 2021. The ratio continued to decrease to 0.67 in 2022 and then to 0.62 in 2023. This downward trend suggests a weakening in the company's ability to cover current liabilities with its most liquid assets after 2019.

Summary of trends

In summary, the period experienced fluctuations in quick assets and current liabilities, with a peak in total quick assets and liquidity ratios around 2019, followed by declines in subsequent years. Current liabilities diminished until 2020 but increased again thereafter to levels close to those at the beginning of the period. The declining quick ratio over the latter years indicates a potential reduction in short-term financial strength and liquidity coverage.

Total Cash Assets

The total cash assets exhibited notable fluctuations across the periods. Initially, there was a sharp increase from 200 million US dollars in 2018 to 2805 million in 2019. This was followed by a decrease to 1951 million in 2020, continuing down to 1336 million in 2021. Subsequently, cash assets rebounded to 2031 million in 2022 before declining significantly to 835 million in 2023. Overall, the trend indicates considerable volatility with a peak in 2019 and a considerable reduction by 2023.

Current Liabilities

Current liabilities showed a general pattern of decrease followed by recovery. The liability amount started at 11250 million US dollars in 2018, dropping steadily to the lowest point of 8248 million in 2020. After 2020, current liabilities increased to 9098 million in 2021 and continued to rise to 11239 million in 2022, slightly decreasing to 11084 million in 2023. This pattern suggests a temporary reduction in short-term obligations around 2020, followed by a reversion close to initial levels in the subsequent years.

Cash Ratio

The cash ratio, representing cash and cash equivalents relative to current liabilities, demonstrated significant variation. The ratio increased sharply from a very low 0.02 in 2018 to 0.31 in 2019, reflecting improved liquidity. After 2019, it declined progressively to 0.24 in 2020, then further down to 0.15 in 2021. A minor recovery was observed in 2022 with a ratio of 0.18, but it dropped again to 0.08 in 2023. This indicates fluctuating liquidity conditions, with the company having relatively more cash relative to liabilities in 2019, but experiencing tighter liquidity by the latest period.

Overall Analysis

The data reveals volatility in liquidity and liabilities management over the six-year span. The peak in cash assets and cash ratio in 2019 suggests a period of strong liquidity, which deteriorated in the following years. The reduction in current liabilities during 2019 and 2020 may have contributed to liquidity improvements in these years. However, as liabilities increased again, liquidity ratios diminished. The sharp decline in cash assets in 2023 alongside nearly stable current liabilities resulted in the lowest cash ratio since 2018, signaling potential liquidity constraints. These trends highlight the importance of monitoring cash and liabilities closely to maintain adequate liquidity levels.