How to apply liquidity ratios to real companies. Here are two cases:

• Case 1: Apple Inc. is one of the most profitable and liquid companies in the world. According to its financial statements for the quarter ended December 26, 2023, it had the following amounts (in millions of USD):

Item	Amount
Cash and cash equivalents	36,008
Marketable securities	100,887
Accounts receivable	37,971
Inventories	4,061
Other current assets	12,073
Total current assets	191,000
Total current liabilities	108,488

Using these figures, we can calculate the liquidity ratios for Apple as follows:

Ratio	Formula	Value
Current ratio	Current assets / Current liabilities	1.76
Quick ratio	(Cash + Marketable securities + Accounts receivable) / Current liabilities	1.61
Cash ratio	(Cash + Marketable securities) / Current liabilities	1.26

These ratios indicate that Apple has a very strong liquidity position, as it can easily cover its current liabilities with its current assets. In fact, it has more cash and marketable securities than its total current liabilities, which means it can pay off all its short-term debt with its cash or near-cash assets.

• Case 2: Macy’s Inc. is a department store chain that has been struggling with declining sales and profitability in recent years. According to its financial statements for the quarter ended October 31, 2023, it had the following amounts (in millions of USD):

Item	Amount
Cash and cash equivalents	1,517
Marketable securities	0
Accounts receivable	219
Merchandise inventories	3,474
Other current assets	1,057
Total current assets	6,267
Total current liabilities	4,798

Using these figures, we can calculate the liquidity ratios for Macy’s as follows:

Ratio	Formula	Value
Current ratio	Current assets / Current liabilities	1.31
Quick ratio	(Cash + Marketable securities + Accounts receivable) / Current liabilities	0.36
Cash ratio	(Cash + Marketable securities) / Current liabilities	0.32

These ratios indicate that Macy’s has a weak liquidity position, as it cannot cover its current liabilities with its most liquid assets. It relies heavily on its merchandise inventories, which may not be easily sold or converted into cash. It also has a high level of debt, which increases its financial risk and interest expenses.

I hope these examples help you understand how to use liquidity ratios to analyze the financial performance and stability of different companies. If you want to learn more about liquidity ratios, you can check out this article that explains their meaning, formulas, and importance.