ACADIA Pharmaceuticals Inc (ACAD)

ACADIA Pharmaceuticals Inc's liquidity ratios have exhibited a notable trend over the years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, decreased from 6.77 in December 2020 to 2.38 in December 2024. This indicates a reduction in the company's capacity to cover its short-term liabilities with its current assets.

Similarly, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also declined from 5.96 in December 2020 to 1.91 in December 2024. This suggests a diminishing ability of ACADIA Pharmaceuticals Inc to meet its immediate financial commitments without relying on inventory.

The cash ratio, which focuses solely on the most liquid assets like cash and cash equivalents to cover current liabilities, mirrored the decline seen in the other liquidity ratios. It decreased from 5.96 in December 2020 to 1.91 in December 2024.

Overall, the decreasing trend in the company's liquidity ratios, particularly the current ratio, quick ratio, and cash ratio, raises concerns about ACADIA Pharmaceuticals Inc's short-term financial health and ability to meet its obligations. Management should closely monitor this trend and take appropriate actions to improve liquidity in order to safeguard the company's financial stability.

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Additional liquidity measure

The cash conversion cycle of ACADIA Pharmaceuticals Inc has fluctuated over the past five years. In 2020, the company's cash conversion cycle was 171.97 days, indicating that the company took approximately 172 days to convert its investments in inventory and other resources into cash. This figure decreased to 150.28 days in 2021, suggesting an improvement in the company's efficiency in managing its working capital. However, by the end of 2022, the cash conversion cycle significantly increased to 238.26 days, indicating that the company faced challenges in converting its resources into cash within a reasonable time frame.

The trend continued in 2023, with the cash conversion cycle reaching 285.89 days, signifying a further deterioration in the company's working capital management efficiency. Notably, by the end of 2024, the cash conversion cycle saw a significant improvement, dropping to 97.89 days. This reduction suggests that ACADIA Pharmaceuticals Inc enhanced its ability to convert its investments into cash more swiftly.

Overall, fluctuations in the cash conversion cycle reflect variations in the company's operational efficiency and effectiveness in managing its working capital. A shorter cash conversion cycle indicates better liquidity management and more effective operations, whereas a longer cycle may imply potential issues with inventory management, payment collection, or supplier terms. Companies should strive to optimize their cash conversion cycle to ensure healthy liquidity levels and operational performance.