OSI Systems Inc (OSIS)

OSI Systems Inc's liquidity ratios have displayed fluctuating trends over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has ranged from 1.22 to 2.06 during this period. While the current ratio has generally stayed above 1, indicating a healthy level of liquidity, the trend is not consistently increasing or decreasing, suggesting some variability in the company's liquidity position.

The quick ratio, a more stringent measure of liquidity because it excludes inventory from current assets, has ranged from 0.61 to 1.09. This ratio indicates OSI Systems Inc's ability to meet short-term obligations without relying on the sale of inventory. The quick ratio has shown a similar fluctuating trend to the current ratio, with no clear upward or downward trajectory.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, has ranged from 0.10 to 0.23. This ratio indicates the company's ability to meet short-term obligations using only its readily available cash resources. Similar to the current and quick ratios, the cash ratio for OSI Systems Inc has shown variability over the past five years.

Overall, while OSI Systems Inc's liquidity ratios have demonstrated some level of stability in terms of remaining above key thresholds (1 for current ratio, 0.5 for quick ratio, and 0.1 for cash ratio), the fluctuating trends suggest that the company's liquidity position may have experienced some shifts and should be monitored closely for any potential liquidity risks in the future.

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Additional liquidity measure

The cash conversion cycle of OSI Systems Inc has exhibited a fluctuating trend over the past five years. In the most recent period ending on June 30, 2024, the company's cash conversion cycle increased to 212.00 days from 174.56 days in the prior year. This indicates that it took OSI Systems Inc longer to convert its investments in inventory back into cash during this period.

Comparing the data to the earlier years, there has been a general upward trajectory in the cash conversion cycle since June 30, 2020 when it stood at 144.00 days. This suggests a potential inefficiency in the company's working capital management practices over the years, as the time taken to sell inventory and collect cash from customers has extended.

The trend in the cash conversion cycle warrants further investigation to identify the underlying reasons behind the lengthening cycle. Companies generally aim to reduce their cash conversion cycles to enhance liquidity and operational efficiency. Accordingly, management at OSI Systems Inc may need to focus on improving inventory turnover, optimizing accounts receivable collection, and managing accounts payable effectively to shorten the cash conversion cycle going forward.