Globus Medical (GMED)

The liquidity ratios of Globus Medical, as represented by the current ratio, quick ratio, and cash ratio, reflect the company's ability to meet short-term financial obligations and manage its cash flow effectively.

1. Current Ratio:
Globus Medical has consistently maintained a high current ratio above 2.0, indicating a strong ability to cover its current liabilities with current assets. The current ratio has shown some volatility over the years but generally stayed well above the acceptable benchmark, with the most recent ratio of 2.54 as of December 31, 2024, showing a slight decrease from previous quarters.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Globus Medical has generally maintained a quick ratio above 1.0, indicating a sufficient level of liquid assets to cover short-term obligations without relying on inventory. However, the ratio has shown some fluctuations, with the most recent ratio of 1.04 as of December 31, 2024, dropping below 1.0, which may raise concerns about the company's ability to meet immediate obligations without selling inventory.

3. Cash Ratio:
The cash ratio focuses exclusively on the most liquid assets, namely cash and cash equivalents, providing a stricter measure of a company's ability to meet short-term obligations. Globus Medical has generally maintained a cash ratio above 0.50, indicating a reasonable level of cash reserves relative to current liabilities. However, the ratio has shown some decline in recent periods, with the cash ratio as of December 31, 2024, standing at 1.04, which may suggest improved liquidity in terms of cash holdings compared to the quick ratio.

Overall, while Globus Medical has demonstrated strong liquidity based on its current ratio levels, the decreasing trends in the quick ratio and fluctuations in the cash ratio signal the need for continued monitoring of the company's short-term liquidity position to ensure its financial health and stability.

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Additional liquidity measure

The cash conversion cycle for Globus Medical has shown fluctuations over the period from March 31, 2020, to December 31, 2024. The company's cash conversion cycle started at 406.87 days in March 2020, increased to 423.06 days in June 2020, and then fluctuated over the following quarters, reaching a peak of 935.00 days in September 30, 2023.

This significant increase in the cash conversion cycle in September 2023 could indicate issues with the company's working capital management, potentially leading to inefficiencies in converting its investments in inventory and accounts receivable into cash.

However, Globus Medical was able to improve its cash conversion cycle significantly in the subsequent quarters, with a notable decrease to 213.90 days in December 31, 2024. This improvement suggests that the company may have implemented strategies to streamline its working capital processes, resulting in a more efficient conversion of assets into cash.

Overall, monitoring and managing the cash conversion cycle is crucial for Globus Medical to ensure optimal working capital management and liquidity positions, ultimately contributing to the company's financial health and operational efficiency.