Globus Medical (GMED)

Liquidity ratios

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current ratio 2.54 4.88 6.18 6.17 6.80
Quick ratio 1.04 1.32 2.80 3.16 3.53
Cash ratio 1.04 1.32 2.80 3.16 3.53

Based on the provided data, let's analyze the liquidity ratios of Globus Medical:

### Current Ratio:
- The current ratio measures the company's ability to cover its short-term obligations with its current assets.
- Globus Medical's current ratio has shown a decreasing trend from 6.80 in 2020 to 2.54 in 2024.
- A current ratio above 1 indicates that the company can meet its short-term liabilities, and Globus Medical has consistently maintained a current ratio well above 1 over the years.
- However, the declining trend raises a potential concern about the company's ability to cover short-term obligations in the future.

### Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets.
- Globus Medical's quick ratio has also been on a downward trend, decreasing from 3.53 in 2020 to 1.04 in 2024.
- A quick ratio above 1 indicates that the company can cover its short-term liabilities without relying on the sale of inventory.
- The declining quick ratio raises concerns about the company's ability to meet its short-term obligations without relying on inventory liquidation.

### Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities with its cash and cash equivalents.
- Globus Medical's cash ratio has followed a similar decreasing trend, dropping from 3.53 in 2020 to 1.04 in 2024.
- A cash ratio above 1 indicates that the company can fully cover its current liabilities with cash on hand, which Globus Medical has been able to do until recently.
- The decreasing cash ratio suggests a reduction in the ability to cover short-term obligations solely with cash.

### Overall Assessment:
- The liquidity ratios of Globus Medical demonstrate a decline in liquidity over the years, as indicated by the decreasing current, quick, and cash ratios.
- While the company has maintained ratios above the critical level of 1, the trend raises concerns about its ability to meet short-term obligations without compromising long-term financial health.
- Management should closely monitor liquidity metrics and take proactive steps to ensure adequate cash flow and liquidity management in the future.


Additional liquidity measure

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Cash conversion cycle days 232.38 564.73 413.79 361.61 384.62

The cash conversion cycle reflects how efficiently Globus Medical manages its working capital by measuring the time it takes to convert its investments in inventory and accounts receivable into cash. The trend analysis of Globus Medical's cash conversion cycle from December 31, 2020, to December 31, 2024, shows fluctuations in the company's efficiency in managing its working capital.

In December 2020, the cash conversion cycle stood at 384.62 days, indicating that Globus Medical took around 384 days to convert its investments in inventory and receivables into cash. Over the next three years, the company showed improvements in its efficiency, as the cash conversion cycle decreased to 361.61 days by December 2021 and further decreased to 232.38 days by December 2024. These reductions in the cash conversion cycle suggest that Globus Medical was able to streamline its operations and manage its working capital more effectively during these years.

However, there was a significant increase in the cash conversion cycle by December 2023, reaching 564.73 days. This spike might indicate temporary difficulties in managing working capital efficiently, potentially due to issues like a slowdown in collection of receivables or higher levels of inventory.

Overall, while there were fluctuations in Globus Medical's cash conversion cycle during the period analyzed, the decreasing trend in recent years is a positive sign of improved working capital management. Monitoring this metric over time can provide insights into the company's operational efficiency and financial health.