ResMed Inc (RMD)

Short-term

Turnover ratios

The activity ratios for ResMed Inc. over recent periods reveal notable trends and provide insights into its operational efficiency and operational cycle management.

Inventory Turnover:
The inventory turnover ratio has shown a decreasing trend from June 2020 through September 2022, declining from approximately 2.94 to a low of 1.65, indicating a slowing in inventory sales relative to inventory levels. This suggests increasing inventory holding periods, potentially reflecting either stock accumulation, slower product demand, or inventory management adjustments. However, from March 2023 onward, there is a gradual recovery in inventory turnover, rising to approximately 2.41 by March 2025, indicating an improvement in inventory utilization and sales efficiency.

Receivables Turnover:
The receivables turnover ratio remained relatively stable with minor fluctuations, generally maintaining levels between 5.20 and 6.38. For most of the period, the ratio hovered around 6, indicating that the company collected its receivables approximately every 60 to 70 days. Notably, a slight downward trend is observed after September 2021, with some fluctuations, but overall, the ratio maintains a relatively consistent collection efficiency within the observed timeframe.

Payables Turnover:
There has been notable variability in payables turnover, with earlier periods showing ratios close to 9.03-11.03, indicating shorter payables periods and more frequent payments to suppliers. From 2022 onwards, the ratio increases significantly at certain points—peaking at approximately 12.39 in June 2023—implying extended payment periods to suppliers. This shift could suggest improved cash management, negotiations for longer payment terms, or strategic payment policies.

Working Capital Turnover:
The working capital turnover ratio demonstrates fluctuations over the period, with peaks around 5.24 in March 2021 and a decline to approximately 2.21 by March 2025. This trend suggests that the efficiency of utilizing working capital to generate sales has decreased over time, potentially due to increased working capital or changes in sales levels relative to working capital investments. The recent ratios indicate a more conservative or slower turnover of working capital.

Summary:
Overall, the analysis indicates that ResMed Inc. experienced a period of inventory accumulation and slower inventory turnover beginning in mid-2020, with a subsequent recovery starting in 2023. Receivables collection remained relatively stable, with slight variations, implying consistent credit policies. The payables turnover increased notably in 2022-2023, potentially reflecting strategic payment practices to optimize liquidity. The working capital turnover has declined over time, signaling a possible increase in working capital levels or shifts in operational efficiency. These activity ratios collectively suggest a period of operational adjustment, with signs of recovery in inventory management and maintained credit collection efficiency, alongside strategic improvements in payables management.

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Average number of days

The activity ratios of ResMed Inc., specifically Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Days of Payables, reveal noteworthy trends over the analyzed period.

Days of Inventory on Hand (DOH):
ResMed’s inventory management shows a rising trend from approximately 124.14 days as of June 30, 2020, to a peak of about 221.58 days by December 31, 2022. Post-2022, there is a notable decline, with DOH decreasing to around 151.21 days by March 31, 2025. The increase during 2020-2022 suggests accumulating inventory or slower inventory turnover, potentially reflecting strategic stockpiling, supply chain disruptions, or adjustments in production levels. The subsequent reduction indicates improved inventory management, faster turnover, or reductions in inventory holdings aligning with operational adjustments.

Days of Sales Outstanding (DSO):
DSO metrics display relative stability with slight fluctuations, generally remaining within the 52 to 70-day range. It was around 59.75 days in June 2020, fluctuating slightly in subsequent quarters. The highest observed was approximately 70.14 days in June 2021. Afterward, DSO tends to stabilize around 60 days by September 2023, with slight increases to roughly 66 days observed by early 2025. This pattern suggests relatively consistent accounts receivable collection periods, with minor variations reflecting operational or collection process adjustments.

Number of Days of Payables:
The accounts payable period demonstrates variability, with a low of approximately 29.47 days in June 2023 and a high of about 45.35 days in June 2024. Earlier periods show fluctuations between roughly 33 to 44 days. An increase in payable days during 2024 indicates a tendency toward extending payment terms to suppliers, possibly leveraging trade credit. The reduction back to around 39 days by March 2025 suggests some normalization in payment practices.

Overall Interpretation:
The increasing inventory days up until 2022, coupled with relatively stable receivables collection periods, implies a phase of inventory accumulation possibly due to external supply chain challenges or strategic stockpiling. The subsequent decline in inventory days suggests an effort to optimize inventory levels and improve turnover efficiency. Meanwhile, receivables collection remains steady, supporting stable operational cash flows. Variability in payable days indicates some flexibility in managing supplier payments to optimize working capital. The overall activity ratio trends reflect strategic adjustments in inventory and payables management aimed at balancing operational efficiency and liquidity.

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Long-term

The analysis of ResMed Inc.'s long-term activity ratios reveals insights into the company's efficiency in utilizing its fixed assets and total assets over the specified periods.

Fixed Asset Turnover Ratio:
This ratio measures how effectively ResMed invests in its fixed assets (such as property, plant, and equipment) to generate revenue. The data indicates that the ratio experienced fluctuations, with a general upward trend observed from June 2020 through March 2023. Specifically, it increased from 5.52 in June 2020 to a peak of 7.59 in March 2023. This rise suggests improved efficiency in utilizing fixed assets to generate sales during this period. However, the ratio declined slightly afterward, reaching 6.34 in June 2023 and 6.44 in September 2023, indicating some easing in fixed asset productivity. The ratios for the latter part of 2023, particularly December 2023 and beyond, are unavailable; nevertheless, the available data show a recovery into higher efficiency levels with ratios of 6.70 in September 2024 and 7.34 in December 2024, illustrating strengthened utilization of fixed assets. The March 2025 ratio stabilizes at approximately 7.30, reflecting sustained efficiency.

Total Asset Turnover Ratio:
This ratio assesses the overall efficiency of asset utilization in generating sales. The data demonstrates a steady upward trend from 0.64 in June 2020 to reach approximately 0.73–0.74 in late 2021. During 2022, the ratio experienced a decline, dipping to 0.56 by December 2022, suggesting a short-term reduction in overall asset efficiency, possibly due to increased asset base or lower sales productivity. Nonetheless, the ratio recovered thereafter, reaching 0.66 by March 2023 and remaining stable around 0.63–0.67 in mid to late 2024. The gradual increase to 0.69 in December 2024 and stabilization at 0.66 in March 2025 indicate that overall asset efficiency has stabilized and improved modestly over recent periods.

Summary:
ResMed Inc.'s fixed asset turnover ratio depicts periods of optimization in fixed asset utilization, with notable improvements during the late 2020s, albeit with some fluctuations. The total asset turnover exhibits a similar pattern of recovery following dips, reflecting a trend towards more effective overall asset management. These ratios collectively suggest that ResMed has been able to enhance its operational efficiency concerning both fixed and total assets over the analyzed timeframe, with recent data signaling a period of stabilization and potential ongoing efficiency gains.