West Pharmaceutical Services Inc (WST)

West Pharmaceutical Services, Inc.'s liquidity ratios have shown some fluctuation over the past five years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has decreased from 3.10 in 2019 to 2.88 in 2023, indicating a slight decline in liquidity over this period. However, the current ratio remains above 1, suggesting that the company has sufficient current assets to cover its current liabilities.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, has followed a similar trend, decreasing from 2.41 in 2019 to 2.24 in 2023. This indicates that the company's ability to cover its short-term obligations without relying on inventory has also decreased slightly over the past five years.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, has fluctuated between 1.33 in 2020 to 1.92 in 2022. The ratio stood at 1.47 in 2023, indicating that the company has a lower level of cash and cash equivalents relative to its current liabilities compared to the previous year.

Overall, while West Pharmaceutical Services, Inc. has maintained relatively strong liquidity positions indicated by current, quick, and cash ratios consistently above 1, there has been a slight decline in liquidity over the past five years. It is important for the company to closely monitor these ratios to ensure it has enough liquid assets to meet its short-term obligations.

---

Additional liquidity measure

The cash conversion cycle of West Pharmaceutical Services, Inc. has fluctuated over the past five years, ranging from 86.68 days in 2019 to 105.72 days in 2022. In 2023, the cash conversion cycle improved to 101.91 days, indicating that the company was able to more efficiently convert its resources into cash during the year.

The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and accounts receivable into cash flows from sales. A shorter cash conversion cycle is generally favorable as it indicates that the company is efficient in managing its working capital and collecting cash from its operations.

The increase in the cash conversion cycle from 2021 to 2022 may suggest potential issues with inventory management, accounts receivable collection, or payment of accounts payable during that period. However, the subsequent improvement in 2023 indicates that the company may have addressed these issues and focused on optimizing its working capital efficiency.

Overall, the trend in the cash conversion cycle of West Pharmaceutical Services, Inc. demonstrates the company's ability to adapt and make operational improvements to enhance its cash flow management over the years.