Innoviva Inc (INVA)

The current ratio measures the ability of Innoviva Inc to meet its short-term obligations with its current assets. Over the past five years, the current ratio has decreased significantly from 55.98 in 2020 to 2.35 in 2024. This decline may indicate potential liquidity issues as the company's current assets are not sufficient to cover its short-term liabilities.

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Similarly, the quick ratio for Innoviva Inc has shown a significant decrease from 112.07 in 2020 to 1.75 in 2024. This sharp decline suggests that the company may struggle to meet its short-term obligations without relying on inventory.

Lastly, the cash ratio specifically looks at the company's ability to cover its current liabilities with its cash and cash equivalents. Like the current and quick ratios, the cash ratio has decreased substantially from 112.07 in 2020 to 1.75 in 2024. This trend indicates that Innoviva Inc may have limited cash reserves available to meet its immediate financial obligations.

Overall, the declining trend in all three liquidity ratios (current ratio, quick ratio, and cash ratio) suggests that Innoviva Inc may face challenges in meeting its short-term financial commitments and may need to focus on improving its liquidity position in the future.

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Additional liquidity measure

The cash conversion cycle for Innoviva Inc has experienced fluctuations over the years. In December 2020 and 2021, the company had a cash conversion cycle of 0.00 days, indicating a quick turnover of cash. However, there was a significant increase in the cash conversion cycle in December 2022, reaching 1,479.19 days. This prolonged cycle suggests that it took the company a considerable amount of time to convert its investments in inventory and accounts receivable back into cash.

Subsequently, there was a notable improvement in the cash conversion cycle in December 2023, dropping to 301.00 days. This may indicate better management of working capital and more efficient operations during that period. However, by December 2024, the cash conversion cycle increased to 336.35 days, albeit to a lesser extent compared to 2022.

Overall, it is essential for Innoviva Inc to closely monitor its cash conversion cycle as it reflects the effectiveness of its working capital management and operational efficiency, thereby impacting the company's liquidity and financial health.