Resideo Technologies Inc (REZI)

Resideo Technologies Inc's liquidity ratios show some fluctuations over the years, indicating changes in the company's ability to meet its short-term obligations:

1. Current Ratio:
- The current ratio has been gradually increasing from 1.45 in 2020 to 1.77 in 2024, with a peak of 1.80 in 2023.
- This suggests that the company's current assets have been generally sufficient to cover its current liabilities, providing a favorable indication of short-term liquidity.

2. Quick Ratio:
- The quick ratio has experienced some fluctuations, with a significant increase from 0.34 in 2020 to 0.52 in 2021, followed by a decrease to 0.39 in 2024.
- The ratio remains below 1 for most years, indicating that the company may face challenges in meeting its immediate obligations with its most liquid assets.

3. Cash Ratio:
- The cash ratio follows a similar trend to the quick ratio, reflecting changes from 0.34 in 2020 to 0.39 in 2024, with varying values in between.
- Like the quick ratio, the cash ratio also suggests that the company may have limited ability to cover its short-term liabilities solely with its cash and cash equivalents.

In summary, Resideo Technologies Inc's current ratio generally shows improving liquidity over the years, while the quick ratio and cash ratio exhibit more fluctuations, highlighting potential challenges in meeting immediate obligations with readily available assets. Further analysis and monitoring of these ratios are advisable to assess the company's overall liquidity position accurately.

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Additional liquidity measure

The cash conversion cycle of Resideo Technologies Inc has fluctuated over the years. As of December 31, 2020, the company's cash conversion cycle was 65.27 days, indicating the number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales. By December 31, 2021, the cycle improved slightly to 63.03 days, suggesting a more efficient management of working capital.

However, in the following years, the cash conversion cycle increased significantly. By December 31, 2022, it extended to 77.30 days, and by December 31, 2023, it further increased to 75.55 days. The trend continued with the cycle peaking at 92.90 days by December 31, 2024. This indicates that Resideo Technologies Inc may be taking longer to convert its investments into cash, potentially facing challenges in managing inventory, accounts receivable, and accounts payable effectively.

Overall, a longer cash conversion cycle can tie up resources and negatively impact liquidity and cash flow management. Consequently, Resideo Technologies Inc may need to focus on optimizing its working capital processes to shorten the cycle and improve its overall financial efficiency.