Alkermes Plc (ALKS)

Alkermes plc's liquidity ratios have shown a generally healthy trend over the past five years, indicating the company's ability to meet its short-term obligations.

1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Alkermes plc's current ratio has been gradually increasing from 2.46 in 2019 to 2.86 in 2023, which means the company has more than enough current assets to cover its current liabilities.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. Alkermes plc's quick ratio has also shown an improvement over the years, increasing from 2.20 in 2019 to 2.32 in 2023. This indicates that the company has a strong ability to meet its short-term obligations using its most liquid assets.

3. Cash Ratio: The cash ratio measures the company's ability to cover its short-term liabilities using only cash and cash equivalents. Alkermes plc's cash ratio has been consistently above 1, signaling the company's strong liquidity position and ability to meet its current obligations with readily available cash.

In conclusion, Alkermes plc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, demonstrate a strong and improving financial position in terms of its ability to meet short-term financial obligations. These ratios suggest that the company has ample liquidity to support its operations and cover any short-term financial needs that may arise.

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Additional liquidity measure

The cash conversion cycle of Alkermes plc has shown a fluctuating trend over the past five years. In 2019, the company had a relatively short cash conversion cycle of 176.34 days, indicating efficient management of its operations in converting inventory into cash. However, there has been a steady increase in the cash conversion cycle since then, reaching 272.35 days in 2021 and further increasing to 341.84 days in 2023.

A longer cash conversion cycle suggests a longer period of time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales. This increase may be attributed to factors such as slower collection of receivables, longer inventory turnover, or extended payment periods to suppliers.

Overall, the increasing trend in Alkermes plc's cash conversion cycle over the past few years highlights the importance of closely monitoring operational efficiency and liquidity management to ensure the company maintains a healthy cash flow position.