Ligand Pharmaceuticals Incorporated (LGND)

Short-term

Turnover ratios

Ligand Pharmaceuticals, Inc.'s activity ratios provide insight into how efficiently the company is managing its assets and liabilities to generate sales.

1. Inventory turnover:
The inventory turnover ratio has been fluctuating over the past five years, indicating varying levels of efficiency in managing inventory. The significant drop in 2023 to 0.44 from 3.97 in 2022 is concerning, suggesting that Ligand Pharmaceuticals may be facing challenges in selling its inventory. A lower inventory turnover ratio could imply obsolete inventory or production inefficiencies.

2. Receivables turnover:
The receivables turnover ratio reflects how quickly the company collects cash from its credit sales. Ligand Pharmaceuticals has generally exhibited a healthy receivables turnover ratio, indicating a consistent ability to collect payments from customers in a timely manner. The decrease in 2023 compared to the previous year suggests a slight slowdown in collecting receivables but remains at a reasonable level overall.

3. Payables turnover:
The payables turnover ratio measures how efficiently the company is paying its suppliers. Ligand Pharmaceuticals has shown a decreasing trend in payables turnover over the last five years, indicating a longer period for settling payable balances. The increase in 2023 compared to 2022 may suggest that the company is taking longer to pay its suppliers, which could signal a potential strain on supplier relationships or cash flow management.

4. Working capital turnover:
The working capital turnover ratio provides insights into how effectively the company is utilizing its working capital to generate sales. Ligand Pharmaceuticals has demonstrated a fluctuating trend in this ratio, with a significant increase in 2022 but decreasing again in 2023. A lower working capital turnover ratio could indicate inefficiencies in managing working capital or challenges in converting assets into revenue.

Overall, the analysis of Ligand Pharmaceuticals, Inc.'s activity ratios suggests mixed efficiency in the management of inventory, receivables, payables, and working capital. The company may need to focus on improving inventory turnover, maintaining healthy receivables turnover, optimizing payables management, and enhancing the utilization of working capital to drive sales and profitability.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its resources related to inventory, receivables, and payables. In the case of Ligand Pharmaceuticals, Inc., we observe significant fluctuations in its activity ratios over the past five years.

1. Days of Inventory on Hand (DOH):
- The DOH measures how many days, on average, inventory is held before being sold. Ligand Pharmaceuticals' DOH has shown noticeable volatility, ranging from as low as 91.85 days in 2022 to as high as 832.26 days in 2023.
- The spike in 2023 indicates an unusually long time taken to sell inventory, which may suggest issues with inventory management or slowing demand for the company's products.
- It is essential for Ligand Pharmaceuticals to monitor and potentially optimize its inventory levels to avoid tying up excess capital and risks of obsolescence.

2. Days of Sales Outstanding (DSO):
- The DSO metric reflects how long it takes the company to collect its accounts receivable. Ligand Pharmaceuticals' DSO has fluctuated over the years, with the lowest at 65.17 days in 2022 and the highest at 126.69 days in 2019.
- The decreasing trend in recent years suggests an improvement in the collection of receivables, indicating better credit management practices or a customer base that settles payments faster.
- A lower DSO implies quicker cash conversion cycles, improving the company's liquidity position and reducing the risk of bad debts.

3. Number of Days of Payables:
- The days of payables metric measures how long it takes a company to pay its vendors. Ligand Pharmaceuticals' days of payables have varied, with a range from 36.67 days in 2022 to 84.27 days in 2023.
- An increase in days of payables can indicate that the company is taking longer to settle its outstanding obligations, which may be a deliberate strategy to preserve cash or negotiate more favorable payment terms with suppliers.
- However, excessively extending payables may strain supplier relationships or signal financial distress, so a balance is crucial for long-term sustainability.

In conclusion, analyzing Ligand Pharmaceuticals' activity ratios reveals fluctuations in inventory turnover, receivables collection, and payables management over the years. The company should focus on optimizing inventory levels, enhancing receivables collection efficiency, and maintaining a balanced approach to managing payables to improve operational effectiveness and financial health.

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Long-term

Ligand Pharmaceuticals, Inc.'s long-term activity ratios indicate the efficiency with which the company utilizes its assets to generate sales. The fixed asset turnover ratio has shown a decreasing trend over the last five years, with a value of 8.41 in 2023 compared to 15.72 in 2022. This indicates that the company generated $8.41 in sales for every dollar invested in fixed assets in 2023. Although the ratio has declined, it still remains relatively high, suggesting efficient utilization of fixed assets.

On the other hand, the total asset turnover ratio has also decreased over the same period, from 0.26 in 2022 to 0.17 in 2023. This implies that the company generated $0.17 in sales for every dollar of total assets in 2023. Although the ratio has declined, it is important to note that Ligand Pharmaceuticals, Inc. may have a higher proportion of non-current assets, such as fixed assets, in its asset base.

Overall, the decreasing trend in both the fixed asset turnover and total asset turnover ratios may indicate potential inefficiencies in asset utilization or changes in the company's business operations. Further analysis of the underlying factors affecting these ratios would provide a more comprehensive assessment of Ligand Pharmaceuticals, Inc.'s long-term activity performance.