Mercury Systems Inc (MRCY)

The liquidity ratios for Mercury Systems Inc. over the specified period reveal notable trends and variations in the company's short-term financial health.

Starting with the current ratio, the figures demonstrate a relatively stable but gradually declining trend from 4.26 on June 30, 2021, to 4.20 on June 30, 2022, and further to 4.02 on June 30, 2023. The ratio continues to slightly decrease to 4.07 by June 30, 2024, indicating a consistent capacity to meet short-term obligations with current assets. However, a significant decline is observed in the year ending June 30, 2025, where the current ratio drops sharply to 0.03. This drastic decrease suggests an imminent or emerging issue with liquidity, implying that the company's current assets are just barely sufficient to cover current liabilities, or may be insufficient.

The quick ratio follows a similar downward trajectory, starting at 2.69 in 2021 and gradually decreasing to 2.65 in 2022 and to 2.48 in 2023. The ratio persists at a comparable level of 2.54 in 2024, maintaining a comfortable margin of liquidity that excludes inventory. However, in 2025, it declines significantly to 1.28, indicating a substantial reduction in the company's ability to meet short-term liabilities with its most liquid assets. Despite this decline, it still remains above 1, suggesting some degree of liquidity remains.

The cash ratio shows a more volatile pattern. It begins at 0.75 in 2021, then declines sharply to 0.34 in 2022 and slightly further to 0.31 in 2023. Interestingly, in 2024, the ratio increases again to 0.77, implying a temporary improvement in the company’s cash holdings relative to current liabilities. Nevertheless, the 2025 figure drops to -0.01, indicating negative cash coverage and implying that the company’s cash and cash equivalents are insufficient to cover current liabilities fully, and possibly reflecting negative net cash position or liquidity issues.

Overall, these ratios depict a company that initially maintained strong liquidity since 2021, with ratios well above critical thresholds, indicating ample short-term assets to meet obligations. However, starting from 2024 into 2025, there is a marked deterioration, especially in 2025, where the ratios suggest severe liquidity constraints. This trend signals potential liquidity problems that warrant further investigation into the company’s current asset management, cash flow performance, and short-term debt levels.

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Additional liquidity measure

The cash conversion cycle (CCC) of Mercury Systems Inc. has exhibited considerable fluctuations over the analyzed period. As of June 30, 2021, the CCC stood at approximately 232.90 days. This duration increased markedly by June 30, 2022, reaching around 271.04 days, indicating a lengthening of the period required to convert investments in inventory and receivables into cash. The trend continued into June 30, 2023, with the CCC rising further to approximately 319.67 days, reflecting potential delays in collection periods or extended inventory holding times.

The upward trajectory persisted through June 30, 2024, when the CCC peaked at about 326.69 days. This sustained increase suggests a significant elongation in the company's operational cycle, which may be attributable to various factors such as changes in receivables collection policies, inventory management inefficiencies, or shifts in supplier or customer dynamics.

However, a notable reversal occurred by June 30, 2025, when the CCC sharply declined to roughly 111.39 days. This substantial decrease indicates an improved operational efficiency, with faster conversion of working capital into cash. The reduction may reflect improved receivables collection, inventory turnover, or credit terms.

Overall, the data illustrates a period of expansion in the cash conversion cycle commencing from mid-2021 through mid-2024, followed by a marked contraction in the subsequent year. The recent decrease suggests a strategic or operational adjustment to optimize liquidity and working capital management.