Ligand Pharmaceuticals Incorporated (LGND)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	90.05	30.67	46.60	68.23	30.61
Days of sales outstanding (DSO)	days	107.58	64.16	116.07	122.20	178.69
Number of days of payables	days	9.12	12.25	14.33	9.75	10.15
Cash conversion cycle	days	188.51	82.59	148.34	180.69	199.14

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 90.05 + 107.58 – 9.12
= 188.51

The cash conversion cycle of Ligand Pharmaceuticals, Inc. has shown significant variability over the past five years. In 2023, the company's cash conversion cycle increased substantially to 857.26 days, compared to the previous year's 120.35 days. This lengthening of the cash conversion cycle indicates that Ligand Pharmaceuticals is taking longer to convert its investments in inventory into cash receipts from sales.

In 2023, the company's cash conversion cycle was significantly higher than in previous years, which could be concerning as it may indicate inefficiencies in managing inventory levels, accounts receivable, and accounts payable. The substantial increase in the cash conversion cycle from 2022 to 2023 suggests that the company may be facing challenges in managing its working capital effectively.

It is important for Ligand Pharmaceuticals to analyze the components of the cash conversion cycle, such as inventory turnover, accounts receivable collection period, and accounts payable payment period, to identify areas for improvement. By focusing on optimizing these components, the company can potentially reduce its cash conversion cycle and improve its overall liquidity and financial performance.