Polaris Industries Inc (PII)

Polaris Industries Inc's liquidity ratios indicate the company's ability to meet its short-term financial obligations.

1. Current Ratio: The current ratio has generally been above 1, which suggests that Polaris has sufficient current assets to cover its current liabilities. The ratio fluctuates over the periods, indicating some variability in liquidity levels. As of December 31, 2023, and December 31, 2024, the ratio improved significantly to 1.39 and 1.15, respectively.

2. Quick Ratio: The quick ratio measures the company's ability to pay off its current liabilities without relying on the sale of inventory. The ratios are generally quite low, with most values below 0.2, indicating a limited ability to cover immediate liabilities with highly liquid assets. The ratio slightly improved in the last two periods, reaching 0.19 as of December 31, 2023, and 0.13 as of December 31, 2024.

3. Cash Ratio: The cash ratio reflects the proportion of cash and cash equivalents to current liabilities, providing an even stricter measure of liquidity. The cash ratio follows a similar trend to the quick ratio, remaining low and below 0.2 for most periods, indicating that Polaris has a limited amount of cash available compared to its short-term obligations.

In summary, while Polaris Industries Inc generally maintains a current ratio above 1, suggesting a reasonable liquidity position, its quick and cash ratios remain consistently low, indicating a potential need to improve the company's ability to meet its short-term obligations without relying heavily on inventory or cash. Management may need to closely monitor and improve the efficiency of working capital management to enhance overall liquidity.

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Additional liquidity measure

The cash conversion cycle is a financial metric that measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. For Polaris Industries Inc, the cash conversion cycle has shown some fluctuation over the observed periods from March 31, 2020, to December 31, 2024.

From March 31, 2020, to June 30, 2020, there was a decrease in the cash conversion cycle from 88.32 days to 75.85 days, indicating an improvement in managing inventory and cash flows. However, the cycle increased to 88.16 days by September 30, 2020, and further to 95.97 days by December 31, 2021, reflecting a potential slowdown in the conversion of resources into cash.

The cycle peaked at 118.12 days on September 30, 2024, suggesting a prolonged time taken to convert investments into cash. This high figure may indicate inefficiencies in managing working capital or challenges in the company's operations. It is worth noting that the cash conversion cycle decreased slightly to 110.59 days by December 31, 2024.

Overall, fluctuations in the cash conversion cycle for Polaris Industries Inc indicate changes in inventory management, payment policies, and sales efficiency. Analysis of the factors influencing the cycle can provide insights into the company's operational effectiveness and potential areas for improvement in managing cash flows and working capital.