Royal Gold Inc (RGLD)

The liquidity ratios of Royal Gold, Inc. reflect the company's ability to meet its short-term obligations effectively. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown a decreasing trend over the past five years. While the current ratio was relatively high in 2020 and 2021, indicating a comfortable level of liquidity, it decreased significantly in 2023 to 2.31. This may suggest a potential decrease in the company's ability to cover its short-term liabilities.

Similarly, the quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also displays a declining trend. Although the quick ratio remained above 2 in all years, indicating a strong ability to cover short-term obligations without relying on inventory sales, the decreasing trend may warrant further investigation into the company's liquidity position.

Furthermore, the cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, also followed a decreasing trend over the same period. While the cash ratio was notably high in 2020 and 2021, it dropped to 1.45 in 2023. This suggests a decreasing ability to cover short-term liabilities with readily available cash, indicating a potential liquidity concern.

Overall, the decreasing trend in all three liquidity ratios over the past five years raises questions about Royal Gold, Inc.'s short-term liquidity position. Further analysis and monitoring of the company's liquidity management practices may be necessary to ensure its ability to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Royal Gold, Inc. has shown a decreasing trend over the years, indicating improved efficiency in managing its working capital.

As of December 31, 2023, the company's cash conversion cycle is 24.40 days, significantly lower than the 54.77 days reported at the end of 2022. This suggests that Royal Gold, Inc. is taking less time to convert its investments in inventory and accounts receivable into cash.

Comparing to previous years, the company has made significant progress in optimizing its cash flow efficiency. The decrease in the cash conversion cycle from 75.02 days in June 2021 to the current level of 24.40 days indicates a more streamlined and effective operating cycle.

Overall, the decreasing trend in the cash conversion cycle reflects positively on Royal Gold, Inc.'s ability to efficiently manage its working capital and generate cash flow from its operational activities.