Premier Inc (PINC)

The liquidity ratios of Premier Inc reveal notable fluctuations over the analyzed period, reflecting varying levels of short-term financial health.

Starting with the current ratio, which measures the company's ability to meet short-term obligations with its current assets, the ratio exhibited a relatively stable but declining trend from its peak of approximately 1.43 at the end of 2023 to a low of around 0.62 by mid-2025. Throughout 2020 and 2021, the current ratio hovered modestly above 1, indicating adequate liquidity. However, from late 2021 onward, the ratio generally declined, dipping below 1 in early 2022, which suggests potential liquidity concerns or increased reliance on liquid assets. The recent uptick to over 1.3 in September 2023 and subsequent fluctuations indicate some recovery, but the overall trend remains variable.

The quick ratio, which excludes less liquid current assets such as inventory from current assets, followed a similar less stable pattern. It remained above 1 during parts of 2021, indicating stronger liquidity positions at those times. However, from mid-2022 onwards, it declined substantially below 1, reaching a low of approximately 0.53 in early 2023. This decline suggests that the firm's most liquid assets, excluding inventory, have become less sufficient to cover short-term liabilities. Recent periods show some improvement, with ratios rising back above 0.8, indicating a moderate increase in near-liquid assets relative to current liabilities.

The cash ratio, representing the most conservative measure of liquidity by focusing solely on cash and cash equivalents, exhibited significant variability. Early in 2020, the ratio was around 0.18, rising modestly to a peak of approximately 0.49 in late 2021. Subsequent periods saw a sharp decrease, with ratios falling below 0.2 in 2022 and 2023, reflecting limited cash reserves relative to current liabilities. Notably, there was a peak of around 0.59 in September 2023, but the ratio generally remained low, indicating that the company holds relatively minimal cash compared to its short-term obligations.

Overall, Premier Inc's liquidity ratios demonstrate periods of adequate short-term financial flexibility that are interspersed with phases of reduced liquidity. The decline of the current and quick ratios below 1 in parts of 2022 and 2023 suggests increased liquidity stress, although some recent indicators show modest recovery. The persistently low cash ratio indicates potential constraints in cash reserves, highlighting a conservative cash management position or challenges in liquid asset accumulation. Continued monitoring would be necessary to assess whether these fluctuations signify structural issues or temporary variances.

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Additional liquidity measure

The cash conversion cycle (CCC) of Premier Inc exhibits considerable fluctuations over the analyzed period, reflecting changes in the company's operational efficiency and working capital management from September 2020 through June 2025.

Initially, the CCC was approximately 157.84 days at the end of September 2020, indicating the total number of days it took for the company to convert investments in inventory and other resources into cash flows from sales. Over the subsequent periods, the CCC demonstrated a general declining trend, reaching its lowest point of approximately 111.11 days in September 2024. This decline suggests an improvement in the company's liquidity management and operational cycle efficiency, likely due to faster receivables collection, inventory turnover, or both.

Between September 2020 and September 2024, the CCC experienced multiple reductions and some minor increases. Notably, there was a significant decrease from March 2021 (163.24 days) to June 2021 (124.24 days), and again a notable decline from June 2024 (145.57 days) to September 2024 (111.11 days). These reductions may be attributable to strategic changes such as optimizing receivables collection processes, inventory management improvements, or extending payables.

However, certain periods saw cyclical increases, such as in December 2020 (152.81 days), March 2022 (128.77 days), and March 2023 (144.23 days), which could indicate temporary challenges in operational efficiency, extended receivable collection periods, or inventory buildup.

Post-September 2024, the CCC increased slightly to approximately 124.49 days in December 2024 and then declined again to 118.12 days in March 2025 before rising modestly to 124.77 days in June 2025. These fluctuations suggest the company continued to adjust its working capital management strategies, balancing operational efficiency with external market or supply chain factors.

Overall, the trend from September 2020 through September 2024 indicates a movement toward enhanced efficiency in cash conversion, with the CCC decreasing by roughly 36 days from its initial value. The pattern of fluctuations across this period reflects adaptive management responding to internal efficiencies and external economic conditions. The recent stabilization and minor increase in late 2024 and mid-2025 suggest ongoing efforts to optimize, or potential challenges in maintaining previous efficiencies, with the current CCC figures indicating an improved liquidity cycle relative to the initial periods.