Select Medical Holdings (SEM)

Select Medical Holdings' liquidity ratios show a mixed performance over the years.

1. Current Ratio: The company's current ratio has fluctuated from a low of 0.90 in 2021 to a high of 1.11 in 2020, indicating varying levels of short-term solvency. A current ratio above 1 indicates the company has more current assets than current liabilities to meet its short-term obligations. While the ratio improved in 2022 and 2024, it dipped in 2021 and 2023, signaling potential challenges in meeting immediate financial obligations in those years.

2. Quick Ratio: Select Medical Holdings has exhibited a concerning trend in its quick ratio, which measures the company's ability to cover immediate liabilities with its most liquid assets. The quick ratio dropped significantly from 0.40 in 2020 to 0.06 in 2021 and remained low in subsequent years. This suggests the company may face difficulties in meeting its short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio, which specifically assesses the company's ability to cover current liabilities using only cash and cash equivalents, mirrors the trend observed in the quick ratio. With a cash ratio of 0.06 consistently from 2021 to 2024, Select Medical Holdings may struggle to pay off its short-term debts solely with its cash reserves.

Overall, Select Medical Holdings' liquidity ratios indicate a potential liquidity challenge, especially in promptly covering short-term obligations with its current assets. It may be prudent for the company to closely monitor and manage its liquidity position to ensure financial stability and meet its impending financial commitments.

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Additional liquidity measure

The cash conversion cycle for Select Medical Holdings has varied over the years based on the provided data. In December 2020, the company had a relatively efficient cash conversion cycle of 0.44 days, indicating that it was able to quickly convert its resources into cash.

Subsequently, in December 2021 and 2022, the cash conversion cycle improved significantly, reaching 0.00 days. This suggests that during these periods, the company was able to manage its cash flows effectively, potentially optimizing its working capital management and decreasing the time it took to convert its investments into cash.

However, in December 2023, the cash conversion cycle increased to 1.45 days, indicating a slight delay in converting resources into cash compared to the previous years. This could be a signal of a change in the company's operations, payment terms, or collection processes.

Lastly, in December 2024, the company managed to bring the cash conversion cycle back to 0.00 days, similar to the levels seen in 2021 and 2022. This may suggest a return to more efficient cash flow management practices.

Overall, the trend in the cash conversion cycle for Select Medical Holdings indicates fluctuations in the efficiency of its working capital management over the years, with periods of both improvement and slight deterioration. Monitoring this metric is crucial for assessing the company's ability to efficiently manage its cash flows and convert its investments into liquid assets.