Masimo Corporation (MASI)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company is managing its assets and liabilities. Let's analyze the activity ratios of Masimo Corporation based on the data provided:

1. Inventory Turnover:
Masimo's inventory turnover has fluctuated over the past five years, ranging from 1.86 to 3.26. The decrease in 2021 followed by an increase in 2022 and 2023 indicates an improvement in managing inventory levels. A higher inventory turnover ratio suggests that Masimo is selling its products more frequently and efficiently.

2. Receivables Turnover:
The receivables turnover ratio for Masimo has varied significantly, with a drastic decrease in 2022 compared to a sharp increase in 2019 and a more stable performance in the subsequent years. A high receivables turnover ratio in 2019 and 2022 may imply that Masimo is collecting its receivables quickly. However, the exceptionally high ratio in 2022 could also indicate potential issues with credit sales or collection practices.

3. Payables Turnover:
Masimo's payables turnover has generally remained stable around 5 to 7 times over the five-year period. A higher payables turnover ratio suggests that Masimo is paying its suppliers more quickly, which may indicate good relationships with vendors or efficient working capital management.

4. Working Capital Turnover:
The working capital turnover ratio reflects how effectively Masimo is using its working capital to generate sales. The increase in the ratio over the years indicates an improvement in utilizing its working capital efficiently. A higher working capital turnover ratio implies that Masimo is generating more revenue with less working capital, which can be a positive sign of operational efficiency.

Overall, Masimo Corporation's activity ratios show a mix of performance levels across different years. The company has shown improvements in managing inventory levels and utilizing working capital efficiently. However, there are fluctuations in receivables turnover that may warrant further investigation into credit policies and collection practices. Payables turnover remains relatively stable, reflecting consistent payment practices.

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Average number of days

Activity ratios provide insight into how efficiently a company is managing its assets and liabilities. Let's analyze Masimo Corporation's activity ratios over the past five years:

1. Days of Inventory on Hand (DOH):
- The DOH measures the average number of days it takes for a company to sell its inventory. Masimo's DOH has been fluctuating over the years, with a significant decrease from 2020 to 2021, followed by a noticeable increase in 2022 and 2023.
- A lower DOH indicates faster inventory turnover, which can be seen as positive for liquidity and cash flow.

2. Days of Sales Outstanding (DSO):
- The DSO metric shows the average number of days it takes for a company to collect payment from its customers. Masimo saw a substantial increase in DSO from 2019 to 2020 and another spike in 2023.
- A lower DSO is typically preferable as it signifies quicker cash conversion from sales. The rising trend in DSO warrants further investigation into the company's credit policies and collection strategies.

3. Number of Days of Payables:
- This ratio represents the average number of days it takes for a company to pay its suppliers. Masimo's days of payables have varied over the years but remained relatively stable, with a slight decrease in 2023.
- A longer payment period can improve cash flow; however, it may strain relationships with suppliers if stretched too far.

Overall, Masimo Corporation's activity ratios show fluctuations in inventory management, receivables collection, and payables payment over the past five years. Further analysis and comparison with industry benchmarks would provide a clearer picture of the company's operational efficiency and potential areas for improvement.

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Long-term

The fixed asset turnover ratio for Masimo Corporation has been relatively stable over the past five years, ranging between 4.20 and 5.15. This indicates that the company generates between $4.20 and $5.15 in sales for every dollar invested in fixed assets. The slight fluctuations in the ratio suggest that Masimo is effectively utilizing its fixed assets to generate revenue.

On the other hand, the total asset turnover ratio has also remained relatively consistent, fluctuating between 0.65 and 0.68 over the same period. This indicates that Masimo generates between $0.65 and $0.68 in sales for every dollar of total assets. The stability of this ratio implies that the company is efficiently using its total assets to generate revenue.

Overall, the long-term activity ratios suggest that Masimo Corporation is effectively managing its assets to generate revenue, with both fixed asset turnover and total asset turnover ratios indicating efficient utilization of assets over the past five years.