Eli Lilly and Company (LLY)

Lilly(Eli) & Co's liquidity ratios have shown a decreasing trend over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has declined from 1.16 in 2019 to 0.94 in 2023. This downward trend indicates a potential weakening in the company's ability to meet its short-term obligations.

Similarly, the quick ratio, also known as the acid-test ratio, has decreased from 0.89 in 2019 to 0.73 in 2023. This ratio provides a more stringent measure of liquidity by excluding inventory from current assets. The declining quick ratio suggests that the company may have difficulty meeting its immediate obligations without relying on inventory.

Furthermore, the cash ratio, which measures a company's ability to cover its short-term liabilities with its cash and cash equivalents, has also exhibited a downward trend, declining from 0.42 in 2019 to 0.32 in 2023. A decreasing cash ratio may indicate potential liquidity challenges for the company, as it has less cash available to meet its short-term obligations.

Overall, the decreasing trend in Lilly(Eli) & Co's liquidity ratios raises concerns about the company's ability to manage its short-term financial obligations effectively. It is important for investors and stakeholders to closely monitor the company's liquidity position and management's strategies to address any potential liquidity risks.

---

See also:

Eli Lilly and Company Liquidity Ratios

---

Additional liquidity measure

The cash conversion cycle of Lilly(Eli) & Co has exhibited fluctuations in recent years. In 2023, the cycle extended to 284.84 days, indicating a slower conversion of resources into cash compared to the prior year. This suggests that the company took longer to convert its investments in inventory and other resources into cash receipts from sales.

The increase in the cash conversion cycle in 2023 may be attributed to factors such as changes in inventory management, sales terms, or payment collection practices. It is essential for the company to analyze the reasons behind this elongation to optimize its working capital efficiency.

Comparing the data over the past five years, it is evident that the cash conversion cycle has been variable, with fluctuations observed year on year. This variability signifies potential challenges in managing the company's working capital effectively.

Overall, a prolonged cash conversion cycle may strain liquidity and working capital management, potentially impacting the company's financial health. Lilly(Eli) & Co should focus on streamlining operational processes, enhancing inventory turnover, and optimizing receivables and payables management to shorten the cash conversion cycle and improve its overall financial performance.