Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
National Oilwell Varco Inc., liquidity ratios
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
- Current Ratio
- The current ratio demonstrates fluctuations over the five-year period. It started at 2.24 in 2011, increased to a peak of 2.78 in 2012, then declined to 2.46 in 2013 and further to 2.19 in 2014, before recovering again to 2.78 in 2015. This pattern suggests that the company’s ability to cover short-term liabilities with current assets remained strong throughout the period, with some variability but ultimately reverting to its earlier high level.
- Quick Ratio
- The quick ratio shows a generally declining trend from 1.35 in 2012 to 1.08 in 2014, after a modest decrease from 1.26 in 2011 to 1.25 in 2013. It slightly improved to 1.18 in 2015. This indicates a reduction in more liquid assets relative to current liabilities during the middle years, though liquidity improved somewhat by the end of the period. The ratio levels consistently above 1.0 suggest the company maintained sufficient liquid assets excluding inventories.
- Cash Ratio
- The cash ratio declined steadily from 0.65 in 2011 to 0.48 in 2014, with a minor increase to 0.49 in 2015. This trend reflects a gradual decrease in the most liquid assets (cash and cash equivalents) relative to current liabilities. While the cash ratio is below 1.0 throughout, indicating less than full coverage of current liabilities by cash alone, the relatively stable level at the end of the period suggests a maintained cautious liquidity position.
Current Ratio
National Oilwell Varco Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Current assets
- The current assets exhibited an overall growth from 12,110 million US dollars in 2011 to a peak of 16,423 million in 2013. Subsequently, there was a slight decline to 16,162 million in 2014, followed by a more pronounced decrease to 11,801 million in 2015. This pattern indicates an initial expansion in short-term asset holdings that reversed sharply towards the end of the observed period.
- Current liabilities
- Current liabilities showed a gradual increase from 5,416 million US dollars in 2011 to 7,374 million in 2014. In 2015, there was a significant reduction to 4,249 million. This downward shift in liabilities during the last year contrasts with the previous rising trend, suggesting a possible effort to reduce short-term obligations.
- Current ratio
- The current ratio, which measures liquidity by comparing current assets to current liabilities, started at 2.24 in 2011 and reached its highest value of 2.78 twice, in 2012 and again in 2015. Between these peaks, the ratio declined to 2.46 in 2013 and 2.19 in 2014. This fluctuation reflects changes in liquidity conditions, with relatively strong liquidity in 2012 and 2015, a slight weakening in 2013, and a notable dip in 2014. The improvement in 2015 is particularly influenced by the decrease in current liabilities alongside still substantial current assets.
Quick Ratio
National Oilwell Varco Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Receivables, net | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Liquidity Trends
- Quick assets exhibited an overall increase from 2011 to 2014, peaking at 8,332 million USD in 2013 before showing a decline to 7,952 million USD in 2014 and a more pronounced decrease to 5,006 million USD by the end of 2015. This suggests an initial strengthening followed by a reduction in liquid resources available within the last reported year.
- Current Liabilities
- Current liabilities also showed an increasing trend from 5,416 million USD in 2011 to 7,374 million USD in 2014, indicating growing short-term obligations. However, in 2015, liabilities decreased significantly to 4,249 million USD, reflecting potential improvements in managing or reducing short-term debt or obligations.
- Quick Ratio Analysis
- The quick ratio, a measure of short-term liquidity, remained relatively stable with values fluctuating between 1.08 and 1.35 over the five years. It peaked at 1.35 in 2012, declined gradually to 1.08 in 2014, and then increased slightly to 1.18 in 2015. This indicates that the company maintained sufficient liquid assets to cover its current liabilities, though the margin decreased somewhat during the mid-period before improving modestly in the final year.
- Overall Observations
- From 2011 through 2014, there was a general pattern of increasing quick assets and current liabilities, which together influenced the quick ratio to fluctuate within a narrow range but trending downward after 2012. The sharp decline in both quick assets and current liabilities in 2015, along with a modest rebound in the quick ratio, suggests a restructuring or a significant change in working capital management during the last period observed.
Cash Ratio
National Oilwell Varco Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total cash assets
- Over the five-year period from 2011 to 2015, total cash assets exhibited a relatively stable trend with slight fluctuations. The value started at 3,535 million US dollars in 2011, decreased marginally to 3,319 million in 2012, and then increased again to 3,436 million in 2013. The highest value in this timeframe was recorded in 2014 at 3,536 million. However, a notable decline occurred in 2015, when total cash assets dropped sharply to 2,080 million, representing a significant reduction in available cash resources.
- Current liabilities
- Current liabilities demonstrated a generally increasing trend from 2011 through 2014, indicating a growing short-term obligation burden. The liabilities rose from 5,416 million in 2011 to 7,374 million in 2014, marking an increase of approximately 36%. However, in 2015, current liabilities decreased considerably to 4,249 million, illustrating an improvement in short-term financial obligations towards the end of the period.
- Cash ratio
- The cash ratio, which measures liquidity by comparing cash assets to current liabilities, showed a declining pattern from 0.65 in 2011 to 0.48 in 2014. This decline reflects a reduced ability to cover current liabilities solely with cash on hand over these years. In 2015, the ratio stabilized slightly at 0.49, indicating a minimal recovery in liquidity but remaining below the initial 2011 level. The general downward trend suggests increasing liquidity risk during most of the observed period, partially alleviated in the final year.
- Summary insights
- The data reveal that while cash assets maintained relative stability and even grew slightly until 2014, current liabilities increased more substantially, leading to a deteriorating cash ratio and consequently a weakening liquidity position. The sharp decrease in both total cash assets and current liabilities in 2015 resulted in a stabilization of the liquidity ratio, though it remained below earlier levels. This combination of decreasing cash reserves and rising short-term obligations through most of the period could indicate growing financial strain, mitigated somewhat in the final year by a reduction in liabilities.