Masimo Corporation (MASI)

Masimo Corporation's liquidity ratios have shown varying trends over the years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has generally remained healthy, ranging from 1.98 to 6.23. However, there was a significant decline in the current ratio from 4.82 in March 2022 to 2.01 in September 2024, indicating a potential strain on short-term liquidity.

On the other hand, the quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. The quick ratio exhibited fluctuations between 0.30 and 3.54, reflecting some volatility in the company's ability to meet immediate obligations without relying on inventory sales.

Lastly, the cash ratio, which focuses solely on cash and cash equivalents to cover current liabilities, experienced a similar trend to the quick ratio, fluctuating between 0.11 and 4.17. The decrease in the cash ratio from 0.58 in December 2024 to 0.11 in September 2024 suggests a potential challenge in meeting short-term obligations with cash on hand alone.

Overall, Masimo Corporation's liquidity ratios indicate a generally stable liquidity position, although recent declines in certain ratios may warrant closer monitoring to ensure adequate short-term financial health.

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Additional liquidity measure

The cash conversion cycle of Masimo Corporation has shown fluctuations over the reported periods. The cash conversion cycle represents the average number of days it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

From March 31, 2020, to December 31, 2024, Masimo's cash conversion cycle ranged from a low of 38.58 days to a high of 166.41 days. In general, a shorter cash conversion cycle is favorable as it indicates that the company is efficiently managing its working capital and converting its investments into cash quickly.

There are periods where Masimo's cash conversion cycle decreased, such as from December 31, 2022, to June 30, 2023, when it dropped from 55.52 days to 117.66 days. This decrease may indicate improvements in inventory management or faster collections from customers during that period.

Conversely, there are instances where the cash conversion cycle increased significantly, like the period from June 30, 2024, to September 30, 2024, where it went up from 130.91 days to 135.30 days. An increasing trend in the cash conversion cycle may suggest challenges in managing working capital effectively or delays in collecting receivables.

Overall, monitoring the cash conversion cycle is essential for evaluating Masimo Corporation's operational efficiency and effectiveness in managing its working capital to generate cash flows. It is crucial for the company to focus on optimizing its inventory turnover, accounts receivable collection, and accounts payable management to maintain a healthy cash conversion cycle.