Mercury Systems Inc (MRCY)

Mercury Systems Inc.'s liquidity ratios over the analyzed period exhibit a generally stable and healthy position, with some variations reflecting operational and financial shifts.

1. Current Ratio: This ratio consistently remains well above 3.0 throughout the period, fluctuating between a high of approximately 4.83 on September 30, 2022, and a low of around 3.05 on December 31, 2020. The elevated current ratio indicates a strong liquidity position with ample current assets relative to current liabilities, suggesting a comfortable ability to meet short-term obligations. The ratio shows some variability but maintains an overall upward trend, peaking in late 2022, before slightly declining in the subsequent periods, yet remaining above 3.0.

2. Quick Ratio: This ratio, which excludes inventory to assess the most liquid assets, remains robust, primarily fluctuating between roughly 2.17 and 3.00. It peaked at 3.00 on September 30, 2022, securing a position well above the critical threshold of 1.0, indicating sufficient liquid assets like receivables and cash to cover immediate liabilities. Periods of decline, such as in mid-2023, still reflect a comfortable liquidity buffer, with the ratio generally trending downward from its peak but staying comfortably above 2.0.

3. Cash Ratio: As the most conservative liquidity measure, reflecting only cash and cash equivalents, this ratio ranged from approximately 0.29 to 1.03. The highest levels were observed in the recent periods (March 31, 2025, at 0.91 and June 30, 2025, at 1.03), indicating increasing cash holdings. Earlier in the period, this ratio dipped below 0.5, particularly around early 2022 and mid-2023, implying reduced immediate cash liquidity at times. Nonetheless, the recent upward trend suggests an improved cash position aimed at strengthening liquidity.

Overall, Mercury Systems Inc. demonstrates solid liquidity metrics with high current and quick ratios, reflecting substantial short-term asset coverage of liabilities. The cash ratio, while historically variable, shows signs of improvement in recent periods, indicating an increasing focus on liquidity preservation and cash management. The stability and robustness across these ratios suggest effective liquidity management, with the company positioned well to handle short-term financial demands.

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Additional liquidity measure

The cash conversion cycle (CCC) of Mercury Systems Inc. from September 30, 2020, through June 30, 2025, demonstrates a general increasing trend, indicating longer periods between the outlay of cash for inventory and the collection of receivables. Initially, the CCC stood at approximately 205.82 days as of September 30, 2020, but this value increased over time, reflecting changes in the company's operational efficiency.

Between September 2020 and September 2021, there was a moderate increase, reaching 221.88 days, with some fluctuations. From the end of 2021 onwards, the CCC exhibited a consistent upward trajectory, surpassing 300 days by the end of 2022, with a peak of approximately 341.71 days on September 30, 2023. The elevated level suggests that the company took longer to convert its investments in inventory and receivables into cash over this period.

Following this peak, the CCC shows signs of slight reduction and stabilization, decreasing to 325.07 days by December 2023, and further declining to around 296.20 days by June 2025. These changes imply a potential improvement in the company's liquidity management and operational efficiency.

Overall, the prolonged and increasing CCC over the analyzed period suggests that Mercury Systems Inc. experienced extended cash cycles, possibly due to factors such as longer inventory holding periods, extended receivables collection times, or delays in cash realization from customers. Despite some recent reductions, the CCC remains relatively elevated, indicating ongoing challenges in short-term liquidity management or shifts in operational cycles.