Roivant Sciences Ltd (ROIV)

The liquidity ratios of Roivant Sciences Ltd for the years ending March 31, 2024, 2023, and 2022 reflect a significant improvement in the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover short-term obligations with its current assets.
- Roivant Sciences Ltd shows a substantial increase in its current ratio, from 6.60 in 2023 to 25.24 in 2024, indicating a notable improvement in liquidity.
- The current ratio exceeding 1 suggests the company has more than enough current assets to cover its current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets.
- Roivant Sciences Ltd's quick ratio has also seen a significant improvement, rising from 6.32 in 2023 to 24.70 in 2024.
- This indicates that the company has a strong ability to meet its short-term liabilities without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative measure of liquidity, focusing solely on the most liquid assets, cash and cash equivalents.
- Roivant Sciences Ltd's cash ratio has shown a similar trend of enhancement, with a notable increase from 6.21 in 2023 to 24.50 in 2024.
- The company's robust cash ratio signifies its ability to cover its short-term obligations solely with cash on hand or highly liquid assets.

Overall, the increasing trend in all three liquidity ratios demonstrates Roivant Sciences Ltd's improved liquidity position over the years, indicating the company's strengthened ability to manage its short-term financial commitments efficiently.

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Additional liquidity measure

The cash conversion cycle of Roivant Sciences Ltd has shown variability over the past three years. In March 2022, the company had a notably short cash conversion cycle of 13.05 days, indicating efficient management of cash flow from operations, inventory, and accounts receivable. However, in March 2023, the cycle increased substantially to 311.56 days, suggesting a potential delay in converting investments in inventory and receivables into cash.

By March 2024, the cash conversion cycle improved to 207.57 days, but it remained relatively high compared to the previous year. This suggests that the company may still be facing challenges in optimizing its working capital efficiency. Overall, Roivant Sciences Ltd may benefit from focusing on streamlining its processes to shorten the cash conversion cycle and improve cash flow management in the future.