Catalent Inc (CTLT)

Catalent Inc's liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to cover short-term obligations with current assets, has shown variability, ranging from a low of 1.76 in 2023 to a high of 2.66 in 2022. A current ratio above 1 indicates that Catalent Inc has more current assets than current liabilities, with a current ratio of 2.52 as of June 30, 2024, suggesting a relatively strong liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. Catalent Inc's quick ratio has also exhibited fluctuations over the period, from a low of 0.90 in 2023 to a high of 2.01 in 2020. The quick ratio as of June 30, 2024, stands at 1.17, indicating a moderate ability to meet short-term obligations without relying on inventory.

The cash ratio, which is the most conservative liquidity ratio, focuses solely on a company's ability to cover current liabilities with cash and cash equivalents. Catalent Inc's cash ratio has shown a decreasing trend, decreasing from 1.07 in 2020 to 0.28 in 2024. A cash ratio of 0.28 as of June 30, 2024, implies that the company may have a limited ability to cover its current liabilities with cash alone, highlighting a potential area of concern.

Overall, Catalent Inc's liquidity ratios suggest that the company has maintained a generally adequate ability to meet its short-term obligations over the past five years, with the current ratio and quick ratio generally above industry standards. However, the declining trend in the cash ratio warrants further attention to ensure the company's liquidity position remains robust in the future.

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Additional liquidity measure

The cash conversion cycle of Catalent Inc has shown variability over the past five years. In the most recent period as of June 30, 2024, the cash conversion cycle decreased to 99.41 days from 125.77 days in the previous year. This reduction indicates that the company has been able to manage its working capital more efficiently, potentially by improving its accounts receivables or inventory turnover.

Comparing the current cash conversion cycle to five years ago, there has been a slight improvement from 99.39 days to 99.41 days. This suggests that Catalent Inc has maintained a relatively stable cash conversion cycle over the long term, showing consistency in managing its cash flow and working capital effectively.

Overall, the decreasing trend in the cash conversion cycle over the years signifies that Catalent Inc has been successful in optimizing its operations to convert its investments in inventory and receivables into cash more quickly. This efficient management of working capital plays a crucial role in the company's financial health and liquidity position.