Ligand Pharmaceuticals Incorporated (LGND)

Based on the provided data for Ligand Pharmaceuticals Incorporated, we observe a significant fluctuation in the liquidity ratios over the quarters. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, was exceptionally high in the first few quarters of the data period, indicating a strong liquidity position. However, the ratio declined sharply in the later quarters, suggesting a potential strain on the company's short-term financial health.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also exhibited a similar trend of high values followed by a substantial decline. This indicates that excluding inventory, the company may struggle to meet its immediate debt obligations in the later quarters.

The cash ratio, which is the most conservative measure of liquidity as it only includes cash and cash equivalents, shows a similar pattern of high values followed by a decline. The company's ability to pay off its current liabilities using only its cash holdings also weakened over time.

Overall, the liquidity ratios of Ligand Pharmaceuticals Incorporated reflect a fluctuating liquidity position, with a notable decline in the ability to meet short-term obligations as the data progresses. This trend suggests that the company may face challenges in managing its short-term liquidity effectively in the latter part of the data period.

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Additional liquidity measure

The cash conversion cycle (CCC) is a key financial metric that reflects the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. Analyzing the data provided for Ligand Pharmaceuticals Incorporated, we observe fluctuations in the CCC over the period under review.

In March 2020, the CCC stood at 219.50 days, indicating that it took the company roughly 219 days to complete a full cash cycle. The CCC then decreased to 77.61 days by June 2020, suggesting an improvement in efficiency in managing inventory, accounts receivable, and accounts payable. However, the trend reversed towards the end of 2020 and into early 2021, with the CCC peaking at 830.44 days by December 2023, signifying a significant delay in converting resources into cash.

Subsequently, there was a notable improvement in CCC performance by March 2024, where the cycle reduced to 435.42 days, although it remained relatively high. This improvement may have been driven by enhanced working capital management practices or changes in operational efficiency.

Overall, the analysis of Ligand Pharmaceuticals Incorporated's CCC points to fluctuations in the company's ability to efficiently manage its working capital and convert investments into cash. The firm may benefit from implementing strategies to streamline inventory management, expedite receivables collection, and optimize payment cycles to enhance its overall liquidity and operational efficiency.