Garmin Ltd (GRMN)

Garmin Ltd's liquidity ratios have shown positive trends over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has remained above 2.0, indicating a strong liquidity position. The current ratio increased steadily from 3.15 in 2020 to 3.54 in 2024, suggesting that Garmin has ample current assets to cover its current liabilities.

Similarly, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also improved over the years, from 1.86 in 2021 to 2.31 in 2024. This indicates that Garmin could meet its short-term obligations without relying on inventory liquidation.

The cash ratio, which assesses the company's ability to cover current liabilities with cash and cash equivalents, has also shown improvement, rising from 1.27 in 2021 to 1.66 in 2024. This demonstrates that Garmin has a solid cash position relative to its current liabilities, ensuring its ability to handle immediate financial obligations.

Overall, Garmin Ltd's liquidity ratios reflect a healthy financial position with strong liquidity reserves, providing a cushion for potential short-term financial challenges and indicating the company's ability to smoothly operate its business activities.

---

Additional liquidity measure

The cash conversion cycle of Garmin Ltd has shown some fluctuations over the past five years.

As of December 31, 2020, the cash conversion cycle stood at 153.48 days, indicating that on average it took the company approximately 153 days to convert its investments in inventory into cash flows from sales.

By December 31, 2021, the cash conversion cycle had increased to 174.63 days, suggesting that the company took longer to convert its investments in inventory into cash during that period.

In the following year, as of December 31, 2022, the cash conversion cycle further increased to 215.66 days, reaching its peak in this period. This prolonged cycle may imply challenges in efficiently managing inventory levels, accounts receivable, and accounts payable.

By December 31, 2023, the cash conversion cycle decreased to 185.69 days, showing some improvement compared to the previous year.

As of the most recent period ending December 31, 2024, the cash conversion cycle decreased further to 165.93 days, indicating better efficiency in converting inventories to cash.

Overall, the trend in the cash conversion cycle of Garmin Ltd has been fluctuating, with the company experiencing improvements in certain years while facing challenges in others. It is essential for the company to focus on managing its working capital effectively to optimize cash flows and improve its overall financial performance.