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.
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
|Total current assets||$1,650||$1,518||$1,244||$1,312||$1,821|
|Total current liabilities||$5,781||$4,967||$5,755||$6,105||$7,340|
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.
|Total current assets||$993||$977||$1,026||$1,015||$969|
|Total current liabilities||$2,339||$2,674||$2,749||$3,444||$3,068|
Norwegian Cruise Line Holdings
|Total current assets||$138||$152||$164|
|Total current liabilities||$653||$817||$945|
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?