Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Phillips 66, liquidity ratios
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.24 | 1.48 | 1.42 | 1.34 | 1.63 | |
| Quick ratio | 0.87 | 1.03 | 1.05 | 0.96 | 1.10 | |
| Cash ratio | 0.14 | 0.34 | 0.31 | 0.29 | 0.41 |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
- Current Ratio
- The current ratio indicates a gradually declining trend over the five-year period. Starting at 1.63 in 2015, it decreased to 1.24 by the end of 2019, representing a reduction of approximately 24%. This suggests a diminishing level of current assets relative to current liabilities, which may imply reduced short-term liquidity strength over the timeframe.
- Quick Ratio
- The quick ratio, which excludes inventories from current assets, also shows a downward trend. Beginning at 1.10 in 2015, it fell to 0.87 in 2019. The decline is less steep than the current ratio, but still notable, which could indicate a lower immediate liquidity position when inventory is excluded.
- Cash Ratio
- The cash ratio demonstrates a marked decrease over the period, falling from 0.41 in 2015 to 0.14 in 2019. This significant drop underlines a reduction in the most liquid assets (cash and cash equivalents) relative to current liabilities, potentially pointing to tighter short-term financial flexibility.
- Overall Liquidity Trends
- All three liquidity ratios present a consistent downward trend. This pattern suggests increasing pressure on the company's ability to meet short-term obligations with its available liquid resources. The decline in cash ratio is particularly notable, indicating a more conservative cash position or increased use of cash resources.
Current Ratio
Phillips 66, current ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 14,395) | 13,209) | 14,390) | 12,680) | 12,256) | |
| Current liabilities | 11,646) | 8,935) | 10,107) | 9,463) | 7,531) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.24 | 1.48 | 1.42 | 1.34 | 1.63 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Current ratio = Current assets ÷ Current liabilities
= 14,395 ÷ 11,646 = 1.24
2 Click competitor name to see calculations.
The financial data indicates certain fluctuations in liquidity and working capital management over the examined period.
- Current Assets
- Current assets exhibit a general upward trend from 12,256 million US dollars at the end of 2015 to 14,395 million US dollars by the end of 2019. Despite a slight decline in 2018, the overall growth suggests an expansion in short-term resources.
- Current Liabilities
- Current liabilities increased more significantly during the same period, rising from 7,531 million US dollars in 2015 to 11,646 million US dollars in 2019. The liability levels show a consistent upward movement, with a slight dip in 2018, mirroring the pattern observed for current assets.
- Current Ratio
- The current ratio, which measures short-term liquidity by comparing current assets to current liabilities, declines from 1.63 in 2015 to 1.24 in 2019. The ratio exhibits a decrease in 2016 and a fluctuating pattern in the subsequent years, ultimately implying a reduction in the company's buffer to cover short-term obligations.
Overall, while the increase in current assets is positive, the faster rise in current liabilities and the declining current ratio indicate a tightening liquidity position over the five-year period. This trend may reflect increased operational pressures or changes in working capital policies, potentially warranting close monitoring to ensure that short-term financial obligations can be met efficiently.
Quick Ratio
Phillips 66, quick ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 1,614) | 3,019) | 3,119) | 2,711) | 3,074) | |
| Accounts and notes receivable, net of allowances | 7,376) | 5,414) | 6,424) | 5,485) | 4,411) | |
| Accounts and notes receivable, related parties | 1,134) | 759) | 1,082) | 912) | 762) | |
| Total quick assets | 10,124) | 9,192) | 10,625) | 9,108) | 8,247) | |
| Current liabilities | 11,646) | 8,935) | 10,107) | 9,463) | 7,531) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.87 | 1.03 | 1.05 | 0.96 | 1.10 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 10,124 ÷ 11,646 = 0.87
2 Click competitor name to see calculations.
- Total Quick Assets
- The value of total quick assets demonstrated an overall increasing trend from 2015 to 2019. Starting at 8,247 million US dollars in 2015, the asset base grew steadily reaching a peak of 10,625 million in 2017. A slight decrease followed in 2018 to 9,192 million, but the amount increased again in 2019 to 10,124 million, indicating a generally robust liquidity position over the period despite some fluctuations.
- Current Liabilities
- Current liabilities exhibited an upward trajectory throughout the five years. Beginning at 7,531 million US dollars in 2015, the liabilities expanded each year with a notable increase in 2019 reaching 11,646 million. The continuous rise in current liabilities suggests increasing short-term obligations which may impact liquidity unless offset by asset growth.
- Quick Ratio
- The quick ratio indicated a gradual weakening in short-term liquidity from 2015 to 2019. The ratio started at 1.1 in 2015, dropped below 1.0 in 2016 to 0.96, improved slightly above 1.0 in 2017 and 2018 at 1.05 and 1.03 respectively, but fell to 0.87 in 2019. The ratio falling below 1.0 in the final year implies that quick assets may not have been sufficient to cover current liabilities at that point, potentially signaling liquidity pressure.
- Summary
- The analysis reveals an increase in quick assets alongside a more pronounced rise in current liabilities, leading to a decline in the quick ratio over the period. While the company maintained a generally solid level of liquid assets, the escalating current liabilities outpaced asset growth in several years, resulting in fluctuating liquidity strength and a potentially heightened short-term financial risk by the end of 2019.
Cash Ratio
Phillips 66, cash ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 1,614) | 3,019) | 3,119) | 2,711) | 3,074) | |
| Total cash assets | 1,614) | 3,019) | 3,119) | 2,711) | 3,074) | |
| Current liabilities | 11,646) | 8,935) | 10,107) | 9,463) | 7,531) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.14 | 0.34 | 0.31 | 0.29 | 0.41 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
| Occidental Petroleum Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 1,614 ÷ 11,646 = 0.14
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets show a fluctuating trend over the five-year period. Beginning at $3,074 million at the end of 2015, cash assets declined to $2,711 million by the end of 2016. The following year, there was an increase to $3,119 million, followed by a slight decrease to $3,019 million in 2018. A significant drop occurred in 2019, with cash assets falling to $1,614 million, representing the lowest point in the period under review.
- Current liabilities
- Current liabilities have generally increased over the timeframe. Starting at $7,531 million in 2015, liabilities rose to $9,463 million in 2016 and continued to climb to $10,107 million in 2017. There was a slight reduction to $8,935 million in 2018, but this was followed by a sharp increase to $11,646 million in 2019, which marks the highest liability figure in the given data.
- Cash ratio
- The cash ratio, which measures the liquidity of the company by comparing cash assets to current liabilities, has demonstrated a downward trend. This ratio declined from 0.41 in 2015 to 0.29 in 2016, with a marginal improvement to 0.31 in 2017 and 0.34 in 2018. However, it dropped significantly to 0.14 in 2019, indicating a reduction in liquidity and a potentially weaker short-term financial position despite the high level of current liabilities.
- Overall analysis
- Over the five years, cash resources have shown volatility with a marked decrease in 2019, while current liabilities have mostly trended upward, peaking that same year. The sustained increase in current liabilities combined with the diminished cash ratio suggests a growing imbalance between liquid assets and short-term obligations, which could impact the company's ability to cover immediate liabilities without raising additional funds or liquidating non-cash assets.