Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Does Carnival Corporation (CCL)’s Current Ratio Present a Problem?

Page 1 of 2

Carnival Corporation (NYSE:CCL) is the biggest cruising company in the world. Carnival owns six separate cruise lines and travels to thousands of destinations around the world.

However, over the past five years Carnival has been in trouble. Due to falling consumer income, Carnival’s earnings have come under pressure, and a series of very high profile disasters have given the company a lot of negative press.

Carnival Corporation (NYSE:CCL)With falling revenues and increasing media hostility, one thing that stands out about Carnival is its balance sheet. Carnival has a poor current ratio of less than 0.5, which signifies that the company will not be able to pay off all of its liabilities falling due within one year.

That said, Carnival Corporation (NYSE:CCL) does have more than enough assets to cover its total liabilities.

Carnival’s Current Ratio

$US Million 2008 2009 2010 2011 2012
Total current assets $1,650 $1,518 $1,244 $1,312 $1,821
Inventory $315 $320 $320 $374 $390
Total current liabilities $5,781 $4,967 $5,755 $6,105 $7,340
Current Ratio 0.29 0.31 0.22 0.21 0.25
Quick Ratio 0.23 0.24 0.16 0.15 0.19

As the table shows, Carnival Corporation (NYSE:CCL) has not had a current ratio or quick ratio of more than 0.5 at any point over the last five year. Does this present a problem?

Well, when compared to its major competitors, it appears that a current ratio of 0.5 is the industry average.  The following two tables show the working capital of Carnival’s two main competitors, Royal Caribbean (NYSE:RCL) and Norwegian. Both Royal Caribbean and Norwegian do not have enough current assets to cover current liabilities – just like Carnival.

Royal Caribbean

$US Million 2007 2008 2009 2010 2011
Total current assets $993 $977 $1,026 $1,015 $969
Inventory $97 $96 $108 $127 $145
Total current liabilities $2,339 $2,674 $2,749 $3,444 $3,068
Current Ratio 0.42 0.37 0.37 0.29 0.32
Quick Ratio 0.38 0.33 0.33 0.26 0.27

Norwegian Cruise Line Holdings

$US Million 2010 2011 2012
Total current assets $138 $152 $164
Inventory $33 $36 $39
Total current liabilities $653 $817 $945
Current Ratio 0.21 0.19 0.17
Quick Ratio 0.16 0.14 0.13

The problem is that with more liabilities than assets, these companies could face financial difficultly if there was a sudden cash call from their creditors.

The current ratio of all three companies has never exceeded more than 0.3.  But what about the longer term? Do these companies have enough assets to cover total liabilities?

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!