Collegium Pharmaceutical Inc (COLL)

The liquidity ratios of Collegium Pharmaceutical Inc over the past five years indicate the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover current liabilities with current assets, has shown some fluctuations. In 2023, the current ratio improved to 1.17, indicating that the company has $1.17 in current assets for every $1 in current liabilities. However, in 2022, the ratio was below 1 at 0.97, suggesting potential liquidity concerns. The ratios for 2021, 2020, and 2019 were relatively stable around 1.13, 1.16, and 1.27, respectively.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similarly to the current ratio, the quick ratio varied over the years. In 2023, the quick ratio improved to 1.10, indicating that the company has $1.10 in liquid assets to cover each $1 of current liabilities. In contrast, the ratio was lower in 2022 at 0.86, which could be a cause for concern.

The cash ratio, which is the most conservative liquidity measure as it considers only cash and cash equivalents, also exhibited fluctuations. The cash ratio has been generally declining over the years, from 0.86 in 2019 to 0.71 in 2023. This trend suggests a decreasing ability to cover current liabilities solely with cash on hand, which could signal a liquidity challenge.

Overall, while Collegium Pharmaceutical Inc has shown some improvements in its current and quick ratios in 2023, the declining trend in the cash ratio warrants attention as it indicates a reduced capacity to meet short-term obligations with cash reserves alone. Management should monitor these ratios closely to ensure the company's liquidity position remains healthy and able to support its operations effectively.

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Additional liquidity measure

The cash conversion cycle of Collegium Pharmaceutical Inc has exhibited fluctuations over the past five years. In 2023, the cash conversion cycle was 206.60 days, showing an improvement compared to the previous year's 276.89 days. However, when compared to 2021 and prior years, the cycle was longer, indicating a potential inefficiency in managing cash flows and working capital.

The company's cash conversion cycle in 2023 was significantly higher than in 2020 and 2019, suggesting a lengthening period for converting investments in inventory and receivables into cash. This prolonged cycle may point to challenges in effectively managing inventory levels, collecting receivables, or optimizing payment periods to suppliers.

Overall, Collegium Pharmaceutical Inc's cash conversion cycle has shown variability in recent years, with potential implications for liquidity management and operational efficiency. Further analysis and comparisons with industry benchmarks could provide insights into the company's working capital management practices.