Perrigo Company PLC (PRGO)

Perrigo Company plc's liquidity ratios have shown some fluctuations over the past five years.

The current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, has decreased from 2.06 in 2019 to 1.79 in 2023. This implies a slight decrease in the company's liquidity position over the period, although it remains above 1, indicating that Perrigo has more than enough current assets to cover its short-term obligations.

The quick ratio, a measure of the company's ability to meet its short-term obligations with its most liquid assets, has also experienced some variability. It decreased from 1.34 in 2019 to 1.07 in 2023. This suggests a slight decline in the company's ability to cover its current liabilities with its most liquid assets, although the ratio remains above 1, indicating a relatively strong liquidity position.

The cash ratio, which measures Perrigo's ability to cover its short-term obligations with its cash and cash equivalents, has fluctuated notably over the past five years. The ratio increased from 0.41 in 2019 to 1.37 in 2021, indicating a substantial improvement in the company's ability to cover its short-term liabilities with cash. However, it then declined to 0.60 in 2023, which may imply some reduced liquidity position compared to the previous year.

Overall, Perrigo Company plc maintains a generally strong liquidity position based on these ratios, with current and quick ratios consistently above 1, indicating the company's ability to meet its short-term obligations. However, the fluctuation in the cash ratio suggests a need for monitoring and further analysis to assess Perrigo's cash management and liquidity sustainability in the future.

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Additional liquidity measure

The cash conversion cycle is a key measure of efficiency in managing a company's working capital. Perrigo Company plc's cash conversion cycle has shown some variability over the past five years, ranging from a low of 131.83 days in 2022 to a high of 149.76 days in 2020.

A lower cash conversion cycle indicates that Perrigo is able to more efficiently convert its inventory and accounts receivable into cash. In contrast, a higher cash conversion cycle suggests that the company may be holding onto inventory or receiving payment from customers at a slower pace, which can tie up cash and negatively impact liquidity.

From 2019 to 2023, Perrigo's cash conversion cycle has generally decreased, which is a positive trend as it signifies improved efficiency in managing working capital. However, slight increases in 2021 and 2023 compared to the previous years indicate that Perrigo may have faced challenges in optimizing its working capital efficiency during those periods.

Overall, while Perrigo's cash conversion cycle has fluctuated over the past five years, a general downward trend is favorable as it indicates the company's efforts to streamline its operations and improve cash flow management. Continued monitoring of the cash conversion cycle will be important to ensure Perrigo maintains efficient working capital management in the future.