ResMed Inc (RMD)

The liquidity ratios of ResMed Inc. over the period from June 30, 2021, to June 30, 2025, exhibit notable trends and variations that provide insights into the company's short-term financial health and liquidity management.

Current Ratio: This ratio measures the company’s ability to meet its short-term obligations with its current assets. The data indicates that ResMed’s current ratio increased from 1.73 in 2021 to a peak of 3.44 in 2025. Specifically, the ratio grew steadily from 1.73 in 2021, reflecting an improving liquidity position, reaching 2.80 in 2022 and 3.12 in 2023. There was a slight decline to 2.59 in 2024 before an uptick to 3.44 in 2025. The ratio consistently remained above 1, signifying adequate current assets relative to current liabilities, with the recent peak suggesting a strengthening liquidity cushion.

Quick Ratio: This ratio, which excludes inventory from current assets to assess more liquid holdings, demonstrated an overall upward trend. Starting at 1.00 in 2021, it increased to 1.25 in 2022 and remained steady at that level through 2023. A minor decrease to 1.19 occurred in 2024, but this was followed by a substantial increase to 2.11 in 2025. The rising quick ratio in recent years indicates enhanced liquidity and a greater ability to cover short-term liabilities with the most liquid assets, particularly as the ratio more than doubled in 2025 compared to earlier years.

Cash Ratio: Considered the most conservative liquidity measure, the cash ratio displayed more volatility. It was low at 0.32 in 2021, increased slightly to 0.41 in 2022, but then declined to 0.32 in 2023 and further to 0.27 in 2024. Notably, the ratio experienced a dramatic increase to 1.19 in 2025, indicating a substantial build-up of cash assets relative to current liabilities.

Overall, the analyzed ratios depict a trend of improving liquidity for ResMed Inc. over the specified period. The upward movement in the current and quick ratios suggests effective management of short-term assets and a growing buffer to meet short-term liabilities. The significant increase in the cash ratio in 2025 points toward an accumulation of cash reserves, which could enhance financial flexibility and stability. However, the fluctuations prior to 2025 highlight periods of varying cash and liquidity management, emphasizing the importance of continued prudence in asset and liability strategies to sustain a robust liquidity position.

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Additional liquidity measure

The analysis of ResMed Inc's cash conversion cycle (CCC) from June 30, 2021, through June 30, 2025, reveals notable fluctuations over this period. At the end of fiscal year 2021, the CCC was approximately 155.90 days, indicating the duration it takes for the company to convert its investments in inventory and other resources into cash flows from sales. Over the subsequent year, the cycle lengthened significantly, reaching around 196.09 days by June 30, 2022. This increase suggests a deterioration in operational efficiency, potentially driven by longer inventory turnover periods, extended receivables collection, or delayed payment to suppliers. The upward trend continued into FY 2023, with the CCC reaching approximately 226.54 days, reflecting further operational complexity or reduced working capital efficiency.

Following this peak, a restructuring or operational improvements appear to have been implemented, resulting in a substantial reduction in the CCC to approximately 170.33 days by June 30, 2024. This decline may be indicative of efforts to enhance receivables collection, optimize inventory management, or extend payables periods. However, by June 30, 2025, the CCC increased slightly again to around 180.00 days, signaling a partial reversal of previous efficiencies or potential changes in supply chain or receivables management strategies.

Overall, the historical pattern displays periods of both deterioration and improvement in the company's ability to manage its working capital cycle efficiently. The fluctuations highlight the dynamic nature of ResMed Inc’s cash flow management, possibly influenced by external market conditions, product demand cycles, or internal operational adjustments. The decrease from the peak in 2023 to 2024 suggests targeted efforts to streamline working capital, while the subsequent increase indicates ongoing challenges or strategic shifts influencing the CCC.