Polaris Industries Inc (PII)

Polaris Industries Inc's liquidity ratios provide insights into its ability to meet its short-term financial obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets.
- Polaris Industries Inc's current ratio has fluctuated over the years, ranging from 1.15 in 2021 to 1.39 in 2023.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered a healthy sign. However, a very high ratio may suggest inefficient use of assets.
- Overall, Polaris Industries Inc's current ratio has remained above 1 in the past years, indicating that it has sufficient current assets to cover its short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity that excludes inventory from current assets.
- Polaris Industries Inc's quick ratio has shown a declining trend over the years, with the lowest ratio recorded in 2022 at 0.14.
- A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on the sale of inventory.
- The decreasing trend in Polaris Industries Inc's quick ratio may raise concerns about its ability to meet immediate obligations using its most liquid assets.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, focusing solely on the company's ability to cover its current liabilities with cash and cash equivalents.
- Polaris Industries Inc's cash ratio has shown a consistent pattern, remaining relatively stable around 0.13 to 0.37 over the years.
- A low cash ratio indicates that the company relies heavily on non-cash current assets to meet its short-term obligations.
- While Polaris Industries Inc's cash ratio is on the lower side, it suggests that the company has a moderate level of cash reserves relative to its current liabilities.

In summary, Polaris Industries Inc's liquidity ratios indicate that the company has generally maintained a level of liquidity to meet its short-term obligations. However, the decreasing trend in the quick ratio raises concerns about its ability to cover immediate liabilities without relying on inventory sales. Management should monitor these ratios closely to ensure optimal liquidity management.

---

Additional liquidity measure

Polaris Industries Inc's cash conversion cycle has shown fluctuating trends over the past five years. In December 2020, the company's cash conversion cycle was 80.83 days, which increased to 95.97 days by December 2021. This upward trend continued in December 2022, with a further increase to 104.39 days. However, by December 2023, there was a significant decrease in the cash conversion cycle to 47.37 days, indicating improved efficiency in managing cash flows.

Despite the improvement in 2023, the trend reversed in December 2024, as the cash conversion cycle rose sharply to 111.35 days. This increase suggests that Polaris Industries Inc faced challenges in converting its investments in inventory and receivables into cash within a shorter period. Overall, the fluctuations in the cash conversion cycle indicate varying levels of efficiency in the company's working capital management over the five-year period.