Biomarin Pharmaceutical Inc (BMRN)

Liquidity ratios such as the current ratio, quick ratio, and cash ratio provide insights into a company's ability to meet its short-term obligations using its current assets.

1. Current Ratio:
Biomarin Pharmaceutical Inc's current ratio has shown a relatively stable trend over the past five years, ranging from 2.51 to 5.33. A current ratio above 1 indicates that the company has more current assets than current liabilities to cover its short-term obligations. Biomarin's current ratio has been well above 1, which suggests a strong ability to pay off its short-term debts using its current assets. However, there was a slight decline in the ratio in 2023, which may indicate a temporary liquidity strain.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of a company's liquidity as it excludes inventory from current assets. Biomarin's quick ratio has also exhibited a consistent trend over the years, ranging from 1.45 to 2.98. A quick ratio above 1 indicates that the company has an adequate level of liquid assets to cover its short-term liabilities without relying on inventory sales. Biomarin's quick ratio has generally been above 1, reflecting a good liquidity position.

3. Cash Ratio:
The cash ratio measures a company's ability to cover its short-term liabilities using only its cash and cash equivalents. Biomarin's cash ratio has fluctuated between 0.91 and 2.19 over the five-year period. A higher cash ratio suggests a stronger ability to meet short-term obligations solely with cash on hand. Biomarin's cash ratio has generally been at acceptable levels, indicating that it has a sufficient amount of cash to meet its immediate financial commitments.

In conclusion, Biomarin Pharmaceutical Inc's liquidity ratios demonstrate a strong liquidity position, with ample current assets to cover its short-term obligations. However, fluctuations in the ratios, especially in 2023, may warrant further investigation into the company's short-term liquidity management.

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Additional liquidity measure

Biomarin Pharmaceutical Inc's cash conversion cycle has been gradually increasing over the years. As of December 31, 2020, the cash conversion cycle was 576.09 days, indicating that it took the company roughly 576 days to convert its investments in inventory and receivables into cash. By December 31, 2024, this metric had extended to 860.14 days, signifying a prolonged period for the company to convert its operating cycle into cash.

This trend suggests that Biomarin Pharmaceutical Inc may be facing challenges in efficiently managing its working capital, potentially leading to increased liquidity risk and potential cash flow constraints. The company may need to focus on improving inventory turnover, enhancing receivables collection processes, and optimizing payment cycles to shorten the cash conversion cycle and enhance overall liquidity management.