Gentherm Inc (THRM)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.01 | 2.12 | 2.39 | 2.66 | 3.12 |
| Quick ratio | 1.15 | 1.25 | 1.43 | 1.81 | 2.42 |
| Cash ratio | 0.39 | 0.47 | 0.55 | 0.89 | 1.30 |
Gentherm Inc's liquidity ratios, including the current ratio, quick ratio, and cash ratio, have shown a general declining trend over the past five years. The current ratio decreased from 3.12 in December 2020 to 2.01 in December 2024, indicating a reduction in the company's ability to cover its short-term liabilities with current assets.
Similarly, the quick ratio dropped from 2.42 in December 2020 to 1.15 in December 2024, suggesting a decrease in the company's ability to meet its immediate financial obligations without relying on inventory.
Furthermore, the cash ratio declined from 1.30 in December 2020 to 0.39 in December 2024, illustrating a reduction in Gentherm Inc's ability to pay off its current liabilities with its available cash and cash equivalents.
Overall, the decreasing trend in these liquidity ratios may indicate potential liquidity challenges for Gentherm Inc, as the company's ability to meet its short-term obligations appears to have weakened over the specified period. Management should closely monitor liquidity levels and consider strategic measures to enhance liquidity position and ensure financial stability.
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 65.03 | 61.21 | 89.10 | 83.52 | 96.28 |
Gentherm Inc's cash conversion cycle has shown a decreasing trend over the past five years. As of December 31, 2020, the cash conversion cycle was 96.28 days, decreasing to 83.52 days by December 31, 2021. Subsequently, there was a slight increase to 89.10 days as of December 31, 2022. However, in the following years, there was a significant improvement in efficiency, with the cash conversion cycle decreasing to 61.21 days as of December 31, 2023, and further to 65.03 days by December 31, 2024.
A declining cash conversion cycle indicates that Gentherm Inc has been managing its working capital more effectively, allowing the company to convert its investments in inventory and receivables into cash more quickly. This can be a positive sign of improved operational efficiency and liquidity. However, it is essential for the company to continue monitoring and managing its cash conversion cycle to ensure optimal working capital management and sustainable financial health.