Ligand Pharmaceuticals Incorporated (LGND)

Ligand Pharmaceuticals, Inc. has demonstrated a strong liquidity position over the years based on its current, quick, and cash ratios. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, showed a significant improvement from 2019 to 2023, reaching 14.15. This indicates that the company has substantially more current assets than current liabilities, providing a comfortable buffer for meeting its short-term financial obligations.

Similarly, the quick ratio, which excludes inventory from current assets to provide a more conservative measure of liquidity, also exhibited a notable upward trend over the years, reaching 12.72 in 2023. This suggests that Ligand Pharmaceuticals possesses sufficient liquid assets to cover its short-term liabilities without relying on selling inventory, highlighting a robust cash and near-cash position.

Furthermore, the cash ratio, which is the most stringent liquidity measure as it only considers cash and cash equivalents relative to current liabilities, also demonstrated a consistent increase in strength from 2019 to 2023, reaching 10.38. This indicates that the company has a significant amount of cash on hand to meet its immediate financial obligations without needing to liquidate other assets.

Overall, Ligand Pharmaceuticals, Inc. has shown impressive liquidity ratios, reflecting its ability to meet short-term financial commitments comfortably and efficiently manage its cash and near-cash resources. The consistent improvement in these ratios over the years suggests a strong financial position and prudent liquidity management by the company.

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Additional liquidity measure

The cash conversion cycle of Ligand Pharmaceuticals, Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle significantly increased to 857.26 days, marking a substantial rise from the previous year. This indicates that it took the company a longer time to convert its investments in inventory and other resources into cash during the year.

Comparing this to 2022, where the cash conversion cycle was 120.35 days, there was a notable deterioration in efficiency. However, in 2021, the cycle improved to 231.79 days from 388.06 days in 2020, suggesting the company managed its working capital more effectively during that period.

In 2019, the cash conversion cycle stood at 283.53 days, indicating a moderate efficiency level in managing the conversion of resources into cash.

Overall, the increasing trend in the cash conversion cycle from 2019 to 2023 may imply potential challenges in managing working capital efficiently, which could impact the company's liquidity and operational performance. Further analysis of the underlying factors driving these changes would be beneficial in understanding the company's financial operations comprehensively.