Premier Inc (PINC)

The liquidity ratios for Premier Inc over the period from June 30, 2021, to June 30, 2025, demonstrate a concerning trend characterized by a decline in the company's short-term liquidity position.

The current ratio, which measures the ability to meet short-term liabilities with current assets, declined from 1.09 in June 2021 to 0.86 in June 2022 and further to 0.79 in June 2023. Although there was an improvement in June 2024, reaching a ratio of 1.00, indicating that current assets equaled current liabilities, it subsequently decreased to 0.64 by June 2025. This indicates a deteriorating capacity to cover short-term obligations with current assets over the analysis period.

The quick ratio, which excludes inventory to provide a more stringent assessment of immediate liquidity, also shows a downward trend. It fell from 0.96 in June 2021 to 0.61 in June 2022, then remained relatively stable around 0.62 in June 2023 before increasing to 0.79 in June 2024. However, it reduced again to 0.55 in June 2025. The decline notably underscores decreasing liquidity in terms of highly liquid assets available to cover current liabilities.

The cash ratio, representing the most conservative liquidity measure by considering only cash and cash equivalents, was 0.39 in June 2021. This ratio diminished sharply to 0.11 in June 2022 and remained at that level for June 2023. Although there was a slight uptick to 0.17 in June 2024, it declined again to 0.09 by June 2025. These figures indicate a persistent and significant reduction in cash holdings relative to current liabilities.

Overall, the liquidity position of Premier Inc has consistently weakened over the analyzed period across all three ratios. The declining current, quick, and cash ratios suggest a diminishing ability to meet short-term obligations using readily available assets, raising potential concerns regarding short-term financial health if such trends persist.

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Additional liquidity measure

The cash conversion cycle (CCC) of Premier Inc over the specified period demonstrates fluctuations that reflect the company's operating efficiency and liquidity management. As of June 30, 2021, the CCC was 124.24 days. This value increased to 145.30 days by June 30, 2022, indicating a decline in operational efficiency or a delay in converting investments in inventory and receivables into cash during that year.

Following this peak, the CCC decreased to 131.96 days on June 30, 2023, suggesting an improvement in cash flow management and potentially more efficient inventory turnover and receivables collection practices. However, the subsequent increase to 140.87 days by June 30, 2024, indicates a reversal of these improvements, possibly due to changes in supply chain or credit policies. By June 30, 2025, the CCC further declined to 123.87 days, which is below the 2021 level, signaling a notable enhancement in liquidity and operational cycle efficiency.

Overall, the data illustrates a pattern of cyclical fluctuations in Premier Inc.'s cash conversion cycle, with periods of both deterioration and improvement. The most recent measurement indicates a more optimized cycle compared to the initial period, reflecting potential strategic adjustments aimed at enhancing cash flow and operational efficiency.