OSI Systems Inc (OSIS)

The analysis of OSI Systems Inc.'s liquidity ratios over the period indicates the following trends:

Current Ratio: The company's current ratio has demonstrated a general upward trajectory from September 2020 through June 2025, with values moving from 1.84 to a peak of 2.11, suggesting an improvement in the company's ability to meet short-term liabilities with its short-term assets. Although there was a notable decline in the period ending September 2021 (approximately 1.11), the ratio recovered and steadily increased thereafter, reaching approximately 2.04 in June 2025. This indicates a strengthening liquidity position and enhanced short-term financial health over these years.

Quick Ratio: The quick ratio, which provides a more stringent measure by excluding inventory from current assets, exhibits fluctuations that mirror the trend in the current ratio. Starting at 0.99 in September 2020, it increased during 2020 and early 2021, peaking at 1.08, but then sharply declined to around 0.53 by September 2021. Subsequently, it recovered gradually, reaching and surpassing the 1.00 threshold by late 2023 and maintaining above this level through June 2025, with the ratio at approximately 1.27. This indicates improving liquidity that can cover immediate liabilities without relying on inventory sales.

Cash Ratio: The cash ratio, representing the most conservative estimate of liquidity (cash and cash equivalents relative to current liabilities), has remained below 0.25 for most of the period, reflecting limited cash holdings in relation to short-term obligations. It decreased slightly from about 0.23 in September 2020 to a low of 0.08 in September 2021, before gradually recovering to approximately 0.16 in June 2025. The modest increases over time suggest a cautious approach to cash management, with the ability to cover a fraction of short-term liabilities strictly through cash and cash equivalents.

Summary: Overall, OSI Systems Inc. has shown an improvement in liquidity measures over the analyzed period. The increasing current and quick ratios imply enhanced short-term financial stability and liquidity management capabilities. However, the cash ratio remains relatively low, indicating a preference for maintaining minimal cash balances relative to short-term liabilities, which is common in firms with efficient working capital management or access to other short-term funding sources. The trends suggest a company that has strengthened its liquidity position, particularly in the more comprehensive current and quick ratios, with consistent improvement noted from late 2021 onwards.

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Additional liquidity measure

The cash conversion cycle (CCC) of OSI Systems Inc. exhibits a notable upward trend over the analyzed period from September 30, 2020, through June 30, 2025. Starting at approximately 165.13 days in September 2020, the cycle experienced gradual increases, reaching over 200 days by September 2022, and continuing to extend further beyond 220 days by March 2024. The highest recorded value within this timeframe is approximately 247.76 days as of September 2024, indicating a significant elongation in the company's operating cycle.

This increase suggests that the company is taking longer to convert its investments in inventory and receivables into cash. The prolonged cycle can be attributed to potential factors such as extended inventory holding periods, slower collection of receivables, or both. The persistently high bookend values imply that the company's liquidity efficiency in managing short-term assets has decreased, which could impact cash flow management and working capital efficiency.

Despite some slight reductions observed in the latter periods—such as a decline from 247.76 days in September 2024 to 232.58 days in March 2025—the overall trend remains elevated compared to initial figures. This indicates persistent operational delays or changes in supply chain, sales, or collection practices over the analyzed timeframe.

In summary, the declining efficiency reflected in the increasing cash conversion cycle points to the need for strategic improvements in inventory management, receivables collection, or both, to optimize working capital utilization and enhance liquidity positions moving forward.