ResMed Inc (RMD)

Short-term

Turnover ratios

Analysis of ResMed Inc Activity Ratios:

1. Inventory Turnover: ResMed Inc's inventory turnover has been relatively stable over the past five years, ranging from 2.78 to 4.56. The company has effectively managed its inventory levels, with a higher turnover indicating efficient management of stock levels and minimal excess inventory.

2. Receivables Turnover: ResMed Inc's receivables turnover has shown some variability but has generally remained within a healthy range of 5.32 to 6.34. A higher turnover rate indicates that the company is efficiently collecting its accounts receivable, which is a positive sign for its liquidity and cash flow management.

3. Payables Turnover: ResMed Inc's payables turnover has fluctuated over the years, with a peak in 2019 at 18.39 and a decrease to 12.83 in 2024. A higher payables turnover ratio suggests that the company is efficiently managing its accounts payable, potentially taking advantage of supplier credit terms.

4. Working Capital Turnover: The working capital turnover ratio measures how efficiently a company is using its working capital to generate sales. ResMed Inc's working capital turnover has also varied but remained relatively stable between 2.59 and 4.93. A higher working capital turnover indicates efficient utilization of working capital to generate revenue.

Overall, ResMed Inc's activity ratios suggest that the company has been effectively managing its inventory, receivables, payables, and working capital to support its business operations and financial performance. However, the company should continue to monitor and optimize these ratios to ensure efficient use of resources and sustainable growth.

---

Average number of days

Days of Inventory on Hand (DOH):
- ResMed Inc's DOH has fluctuated over the past five years, ranging from a low of 80.13 days in 2021 to a high of 131.43 days in 2023.
- A higher DOH value indicates that ResMed is taking longer to turn its inventory into sales, which may result in higher carrying costs and potential obsolescence risks.
- The decreasing trend in DOH from 2023 to 2024 is a positive sign as it suggests improved inventory management efficiency.

Days of Sales Outstanding (DSO):
- ResMed Inc's DSO has also varied over the years, with a range from 57.60 days in 2022 to 68.66 days in 2021.
- A lower DSO value indicates that ResMed is collecting its accounts receivable more quickly, which is beneficial for cash flow management.
- The increase in DSO from 2021 to 2022 and the subsequent decrease in 2023 and 2024 suggest fluctuations in the efficiency of the company's credit and collection policies.

Number of Days of Payables:
- ResMed Inc's number of days of payables has been inconsistent, with a low of 19.85 days in 2023 and a high of 39.99 days in 2020.
- A higher number of days of payables implies that ResMed is taking longer to pay its suppliers, potentially preserving cash flow but possibly straining supplier relationships.
- The fluctuations in payables days could be a result of various factors such as negotiation terms with suppliers or changes in cash flow management strategies.

---

Long-term

The long-term activity ratios of ResMed Inc, namely the fixed asset turnover and total asset turnover, provide insights into how efficiently the company is utilizing its assets to generate revenue.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio has been consistently increasing over the past five years from 7.09 in 2020 to 8.54 in 2024. This indicates that ResMed Inc is effectively utilizing its fixed assets to generate sales.
- A higher fixed asset turnover ratio suggests that the company is efficiently generating revenue from its investments in property, plant, and equipment.
- The increasing trend in the fixed asset turnover ratio implies that ResMed Inc has been able to enhance its operational efficiency and extract more value from its fixed assets over the years.

2. Total Asset Turnover:
- The total asset turnover ratio fluctuated over the years, with a low of 0.62 in 2023 and a peak of 0.72 in 2022. As of June 30, 2024, the ratio stands at 0.68.
- The total asset turnover ratio measures how effectively the company is using all its assets (both fixed and current) to generate sales.
- The ratios below 1 indicate that ResMed Inc is not generating sufficient revenue compared to its total assets. However, the company's ability to effectively manage its fixed assets and generate revenue has improved over time.
- A stable total asset turnover ratio suggests that ResMed Inc is maintaining a consistent level of efficiency in utilizing its total assets to drive sales.

Overall, both the fixed asset turnover and total asset turnover ratios suggest that ResMed Inc has been improving its efficiency in generating revenue from its assets, particularly its fixed assets. The increasing trend in fixed asset turnover and relative stability in total asset turnover indicate positive long-term management of assets for revenue generation.