Ligand Pharmaceuticals Incorporated (LGND)

Based on the provided data, we can assess the liquidity position of Ligand Pharmaceuticals Incorporated using three key ratios: the Current Ratio, Quick Ratio, and Cash Ratio, for the years 2020 to 2024.

1. Current Ratio:
- The Current Ratio measures the company's ability to pay its short-term obligations with its current assets.
- Ligand Pharmaceuticals showed a strong upward trend in the Current Ratio from 2020 to 2023, indicating an increasing ability to cover short-term liabilities.
- However, in 2024, the Current Ratio decreased slightly compared to the previous year but still remained at a relatively healthy level, signifying a potential ability to meet short-term obligations.

2. Quick Ratio:
- The Quick Ratio, also known as the Acid-Test Ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- Ligand Pharmaceuticals exhibited significant fluctuations in the Quick Ratio over the five-year period, with a notable decline in 2022 where the ratio hit zero.
- Despite this dip in 2022, the company's Quick Ratio improved in subsequent years, suggesting an enhanced ability to cover immediate liabilities without relying on inventory.

3. Cash Ratio:
- The Cash Ratio is the most conservative liquidity measure, focusing solely on the company's ability to cover short-term obligations using cash and cash equivalents.
- Ligand Pharmaceuticals consistently maintained a healthy Cash Ratio throughout the period, showcasing a strong ability to meet short-term obligations with readily available cash resources.
- The company's Cash Ratio remained relatively stable, with fluctuations reflecting changes in cash and cash equivalents over the years.

In conclusion, Ligand Pharmaceuticals demonstrated overall sound liquidity positions across the reviewed years, with improvements in Current Ratio and Quick Ratio from 2020 to 2023. While the ratios fluctuated, indicating potential variations in the company's liquidity management, the consistent maintenance of healthy ratios suggests a generally robust financial position concerning short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Ligand Pharmaceuticals Incorporated has exhibited fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle stood at 317.82 days, indicating that it took, on average, almost a year to convert its investments in raw materials and other resources into cash receipts from sales.

By December 31, 2021, Ligand Pharmaceuticals had managed to significantly reduce its cash conversion cycle to 160.42 days, signifying an improvement in its efficiency in managing working capital. This reduction indicates that the company was able to convert its investment in inventory into cash more quickly, potentially due to improved inventory management or faster collection of receivables.

Continuing the trend, by December 31, 2022, the cash conversion cycle decreased even further to 91.85 days, reflecting the company's enhanced operational efficiency and effectiveness in converting resources into cash. This shorter cycle implies that Ligand Pharmaceuticals was likely converting its inputs into sales revenue at a faster pace, potentially strengthening its liquidity position.

However, by December 31, 2023, the cash conversion cycle increased to 249.61 days, suggesting a temporary setback in the company's working capital management. This increase could be due to factors such as a slowdown in sales, delayed payments from customers, or increased inventory holding periods, which impacted the overall efficiency in converting resources into cash.

As of December 31, 2024, Ligand Pharmaceuticals experienced a significant rise in its cash conversion cycle to 465.20 days, marking a considerable deterioration in its working capital efficiency. This extended cycle could indicate challenges in managing inventory levels, collecting receivables, or paying off liabilities promptly, which might have strained the company's cash flow and liquidity position.

Overall, while Ligand Pharmaceuticals demonstrated improvements in its cash conversion cycle in some years, the fluctuations observed over the five-year period highlight the importance of consistent working capital management to optimize cash flow and financial performance.