Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
YUM! Brands Inc., liquidity ratios
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Current ratio | 0.55 | 0.68 | 0.75 | 0.87 | 0.95 | |
| Quick ratio | 0.36 | 0.37 | 0.39 | 0.49 | 0.61 | |
| Cash ratio | 0.24 | 0.24 | 0.25 | 0.35 | 0.49 |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
A consistent decline in liquidity is evident across all measured metrics between December 2011 and December 2015. The overall trend suggests a systemic reduction in the margin of safety for meeting short-term obligations, with all three ratios remaining below the 1.0 threshold throughout the period.
- Current Ratio
- A steady downward trajectory is observed, with the ratio decreasing from 0.95 in 2011 to 0.55 by 2015. The persistent value below 1.0 indicates that current liabilities consistently exceed current assets, suggesting a heightened reliance on external financing or cash flow from operations to cover short-term debts.
- Quick Ratio
- The capacity to meet immediate liabilities without relying on the sale of inventory has diminished significantly. This ratio declined from 0.61 in 2011 to 0.36 in 2015, reflecting a narrowing liquidity position and a decrease in the most liquid assets relative to current liabilities.
- Cash Ratio
- A pronounced contraction occurred between 2011 and 2013, where the ratio fell from 0.49 to 0.25. Following this period of decline, the ratio stabilized at 0.24 during 2014 and 2015, indicating that the relationship between cash equivalents and current liabilities reached a plateau toward the end of the analyzed period.
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Current Ratio
YUM! Brands Inc., current ratio calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 1,688) | 1,646) | 1,691) | 1,909) | 2,321) | |
| Current liabilities | 3,088) | 2,411) | 2,265) | 2,188) | 2,450) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 0.55 | 0.68 | 0.75 | 0.87 | 0.95 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Current ratio = Current assets ÷ Current liabilities
= 1,688 ÷ 3,088 = 0.55
2 Click competitor name to see calculations.
The liquidity position of the entity exhibits a consistent and significant deterioration over the five-year period from 2011 to 2015. A persistent decline in the current ratio indicates a diminishing capacity to cover short-term obligations using short-term assets.
- Current Assets Trend
- Current assets experienced a general downward trajectory for the majority of the period, falling from US$ 2,321 million in 2011 to a low of US$ 1,646 million in 2014. Although a marginal increase to US$ 1,688 million was recorded in 2015, the overall level of liquid assets remained substantially lower than the 2011 baseline.
- Current Liabilities Trend
- Current liabilities demonstrated a volatile but ultimately upward trend. After an initial decrease in 2012, obligations rose steadily, culminating in a sharp increase to US$ 3,088 million by December 26, 2015. This growth in short-term debt and obligations significantly outpaced the movement of current assets.
- Current Ratio Analysis
- The current ratio shows a continuous year-over-year decline, starting at 0.95 in 2011 and ending at 0.55 in 2015. Because the ratio remained below 1.00 throughout the entire period, the entity operated with current liabilities exceeding current assets. The acceleration of this decline, particularly between 2014 and 2015, suggests a heightened risk regarding short-term solvency and a growing reliance on external financing or operational cash flow to meet immediate liabilities.
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Quick Ratio
YUM! Brands Inc., quick ratio calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 737) | 578) | 573) | 776) | 1,198) | |
| Accounts and notes receivable, net | 377) | 325) | 319) | 301) | 286) | |
| Total quick assets | 1,114) | 903) | 892) | 1,077) | 1,484) | |
| Current liabilities | 3,088) | 2,411) | 2,265) | 2,188) | 2,450) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.36 | 0.37 | 0.39 | 0.49 | 0.61 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 1,114 ÷ 3,088 = 0.36
2 Click competitor name to see calculations.
A systematic decline in immediate liquidity is evident over the analyzed five-year period. The ability to cover current liabilities with quick assets weakened consistently, moving from a position of moderate coverage to a more constrained liquidity state.
- Quick Ratio Analysis
- The quick ratio demonstrates a continuous downward trajectory, beginning at 0.61 in 2011 and ending at 0.36 in 2015. This steady erosion indicates that the liquid asset base has not kept pace with short-term financial obligations.
- Quick Asset Performance
- Quick assets experienced a marked reduction between 2011 and 2013, falling from 1,484 million US$ to 892 million US$. Although assets recovered to 1,114 million US$ by 2015, this growth was insufficient to reverse the overall downward trend of the liquidity ratio.
- Current Liability Trends
- Current liabilities showed an overall increasing trend, particularly toward the end of the period. Liabilities rose from 2,411 million US$ in 2014 to 3,088 million US$ in 2015, representing a significant increase that placed further pressure on the organization's liquidity.
- Comparative Liquidity Insight
- The widening gap between the acceleration of current liabilities and the slower recovery of quick assets is the primary driver of liquidity deterioration. By the end of 2015, the company held only 0.36 US$ in quick assets for every 1.00 US$ of current liabilities, marking the lowest coverage level in the reported timeframe.
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Cash Ratio
YUM! Brands Inc., cash ratio calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 737) | 578) | 573) | 776) | 1,198) | |
| Total cash assets | 737) | 578) | 573) | 776) | 1,198) | |
| Current liabilities | 3,088) | 2,411) | 2,265) | 2,188) | 2,450) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.24 | 0.24 | 0.25 | 0.35 | 0.49 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 737 ÷ 3,088 = 0.24
2 Click competitor name to see calculations.
The liquidity position of the organization experienced a notable decline between 2011 and 2015, characterized by a reduction in the immediate availability of cash relative to short-term obligations.
- Cash Ratio Trajectory
- A consistent downward trend in the cash ratio is observed from 2011 to 2014, falling from 0.49 to 0.24. The ratio remained stagnant at 0.24 in 2015, indicating a diminished capacity to settle current liabilities using only cash and cash equivalents compared to the start of the period.
- Cash Asset Fluctuations
- Total cash assets decreased significantly from 1,198 million US$ in 2011 to 573 million US$ in 2013. While a modest recovery occurred by 2015, reaching 737 million US$, the levels remained substantially lower than the 2011 baseline.
- Current Liability Dynamics
- Current liabilities exhibited volatility, decreasing slightly between 2011 and 2012 before entering a period of growth. A sharp increase is noted in 2015, where liabilities rose to 3,088 million US$, the highest level in the analyzed period, which exerted further downward pressure on the overall liquidity profile.
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