Masimo Corporation (MASI)

Masimo Corporation has exhibited a declining trend in its liquidity ratios over the years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 4.71 in 2020 to 1.98 in 2024. This decline indicates a reduction in the company's ability to meet its short-term liabilities with its current assets.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also decreased significantly from 3.36 in 2020 to 0.32 in 2024. This suggests that Masimo Corporation may face challenges in meeting its short-term obligations without relying on inventory, which may not be as easily converted to cash.

Furthermore, the cash ratio, which measures the company's ability to cover its short-term liabilities with cash and equivalents, also showed a decreasing trend from 2.74 in 2020 to 0.29 in 2024. This indicates a decline in the company's ability to quickly settle its obligations using its cash reserves alone.

Overall, Masimo Corporation's liquidity ratios suggest a weakening liquidity position over the years, which may warrant further analysis and attention to ensure the company's ability to meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Masimo Corporation has shown fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was relatively long, standing at 184.18 days. This indicates that Masimo took approximately 184 days to convert its investments in raw materials into cash from sales.

By December 31, 2021, Masimo managed to improve its cash conversion cycle to 166.44 days, demonstrating some efficiency in managing its working capital. However, by the end of December 31, 2022, the company made significant progress, reducing the cycle to 53.43 days, reflecting better management of inventory, accounts receivable, and accounts payable.

Subsequently, as of December 31, 2023, the cash conversion cycle increased to 130.59 days, suggesting a potential slowdown in cash flow conversion efficiency. Nonetheless, by the end of December 31, 2024, Masimo was able to significantly reduce its cycle to 38.62 days, indicating a rapid conversion of investments into cash.

Overall, the trend in Masimo Corporation's cash conversion cycle shows fluctuations, with periods of improvement and some setbacks. It is essential for the company to continue monitoring and optimizing its working capital management to ensure efficient cash flow conversion and sustainable financial performance.