Premier Inc (PINC)

Premier Inc's liquidity ratios indicate the company's ability to meet its short-term obligations effectively. Looking at the trend over the past five years, the current ratio has been decreasing, from a high of 1.25 in 2020 to 1.00 in 2024. This downward trend suggests a potential weakening in the company's ability to cover its current liabilities with current assets.

Similarly, the quick ratio, which excludes inventory from current assets, has also been on a decreasing trend from 0.47 in 2020 to 0.34 in 2024. This indicates that Premier Inc may have difficulties meeting its short-term obligations without relying on the sale of inventory.

The cash ratio, which provides the most conservative measure of liquidity as it considers only cash and cash equivalents, has also been decreasing over the years, from 0.20 in 2020 to 0.17 in 2024. This suggests that the company's ability to pay off short-term liabilities solely with cash has been diminishing.

Overall, the declining trend in these liquidity ratios raises concerns about Premier Inc's short-term liquidity position. The company may face challenges in meeting its immediate financial obligations without improving its liquidity management strategies. It would be advisable for the management to closely monitor and address these liquidity weaknesses to ensure the company's financial stability and solvency in the upcoming periods.

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Additional liquidity measure

Premier Inc's cash conversion cycle has shown fluctuations over the past five years. In the most recent fiscal year ending June 30, 2024, the company's cash conversion cycle was 49.83 days, demonstrating an improvement from the previous year's figure of 50.22 days. This indicates that the company was able to convert its invested resources into cash more efficiently in 2024.

However, compared to the fiscal year ending June 30, 2022, where the cash conversion cycle was 79.05 days, there has been a significant reduction in the number of days required to convert resources into cash. This reduction in the cash conversion cycle signifies a more effective management of working capital in recent years.

It is worth noting that although there was an improvement in the cash conversion cycle in 2024 compared to the prior year, the company's performance in 2024 was still slightly higher than in 2020 when the cash conversion cycle was 51.56 days.

Overall, Premier Inc's cash conversion cycle has shown variability over the past five years, with efforts to improve working capital efficiency reflected in the recent decrease in the number of days required to convert resources into cash. Further monitoring of this metric will be essential to assess the company's ongoing management of working capital.