Select Medical Holdings (SEM)

The current ratio, quick ratio, and cash ratio are important liquidity ratios used to evaluate a company's ability to meet its short-term liabilities.

The current ratio measures the company's ability to cover its short-term obligations with its current assets. In the case of Select Medical Holdings Corporation, the current ratio has shown fluctuations over the years, ranging from a high of 1.33 in 2019 to a low of 0.90 in 2021. A current ratio of around 1 indicates that the company may be just able to meet its current obligations with its current assets.

The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. Select Medical Holdings Corporation's quick ratio has been consistent with its current ratio over the years, indicating that the company's current assets are largely composed of cash and near-cash assets.

The cash ratio specifically measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. Select Medical Holdings Corporation's cash ratio has fluctuated over the years, with a notable decrease from 0.49 in 2019 to 0.25 in 2023. This indicates a lower level of cash relative to current liabilities in 2023 compared to previous years.

Overall, while Select Medical Holdings Corporation has shown some fluctuations in its liquidity ratios over the years, it is essential to consider these ratios in conjunction with other financial metrics to get a comprehensive view of the company's financial health and ability to meet its short-term obligations.

---

Additional liquidity measure

The cash conversion cycle of Select Medical Holdings Corporation has fluctuated over the past five years. In 2023, the company's cash conversion cycle improved to 40.40 days compared to 42.08 days in 2022. This indicates that Select Medical Holdings is taking less time to convert its resource inputs into cash flows.

The trend over the years shows some volatility, with the cycle length decreasing in 2021 to 36.17 days before increasing again in 2022. In 2020, the cycle was relatively longer at 45.45 days, while in 2019, it was at 39.58 days.

A lower cash conversion cycle generally indicates that the company is managing its working capital efficiently, as it is taking less time to collect receivables, sell inventory, and pay off its liabilities. However, it is important to consider the industry norms and benchmark against competitors to gain a better understanding of Select Medical Holdings' performance in this aspect.