Universal Health Services Inc (UHS)

The liquidity ratios of Universal Health Services Inc show the company's ability to meet its short-term obligations and cover immediate financial needs.

1. Current Ratio:
- The company's current ratio has fluctuated over the years, ranging from a low of 1.02 in June 2020 to a high of 1.40 in December 2023.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered a healthy sign.
- Universal Health Services Inc maintained a current ratio above 1 throughout the period, indicating its ability to meet short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, measures the ability to pay off current liabilities without relying on the sale of inventory.
- Universal Health Services Inc's quick ratio has been relatively low, with values ranging from 0.04 to 0.49 during the period.
- A quick ratio below 1 may indicate potential liquidity issues if the company is unable to turn its current assets into cash quickly to meet short-term obligations.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities using only its cash and cash equivalents.
- Universal Health Services Inc's cash ratio has also been relatively low, ranging from 0.03 to 0.49.
- A cash ratio below 1 suggests that the company may not have enough cash on hand to cover its current liabilities in full.

In summary, while Universal Health Services Inc has maintained current ratios above 1, indicating a reasonable ability to meet short-term obligations, the low quick and cash ratios suggest that the company may have limitations in quickly converting assets to cash to cover immediate needs. Investors and analysts may want to monitor the company's liquidity position closely to ensure its ability to weather unexpected financial challenges.

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Additional liquidity measure

The cash conversion cycle (CCC) is a key metric that measures how long it takes a company to convert its investments in inventory and other resources into cash flows from sales. For Universal Health Services Inc, the CCC has fluctuated over time based on the provided data.

From March 31, 2020, to December 31, 2021, the CCC for Universal Health Services Inc gradually increased from around 47 days to approximately 53 days. This increase may indicate inefficiencies in managing the company's working capital, as the company took longer to convert its resources into cash during this period.

However, from March 31, 2022, to September 30, 2023, there was a slight decrease in the CCC, indicating improved efficiency in managing working capital and converting assets into cash. The CCC ranged between 51 to 54 days during this period.

Notably, there was a significant drop in the CCC from December 31, 2023, to June 30, 2024, where it declined from 17.56 days to 7.48 days. This sharp decrease suggests that Universal Health Services Inc improved its cash conversion cycle efficiency significantly, possibly by streamlining operations, managing inventory more effectively, or optimizing accounts receivable and payable processes.

Overall, the trend in Universal Health Services Inc's cash conversion cycle reflects fluctuations in the company's ability to efficiently manage its working capital and convert assets into cash. Efforts to maintain a lower CCC generally indicate better liquidity and operational efficiency within the company.