ResMed Inc (RMD)

ResMed Inc's liquidity ratios provide insights into its ability to meet short-term financial obligations. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has shown a fluctuating trend over the past five years. In 2024, the current ratio stands at 2.59, indicating that the company has $2.59 in current assets for every $1 in current liabilities. This is a slight decrease from the previous year's ratio of 3.12 but remains at a healthy level.

The quick ratio, a more stringent measure of liquidity as it excludes inventory from current assets, has also shown variability but has generally remained above 1.0 over the years. In 2024, the quick ratio is 1.19, implying that ResMed Inc can cover its short-term obligations using liquid assets more easily than with current assets inclusive of inventory.

The cash ratio, which assesses the company's ability to cover immediate liabilities with cash and cash equivalents, has experienced fluctuations as well. The ratio in 2024 stands at 0.27, indicating that ResMed Inc holds $0.27 in cash and cash equivalents for every $1 of current liabilities, signaling a lower level of liquidity compared to the previous year.

Overall, ResMed Inc's liquidity ratios suggest that the company has maintained a strong liquidity position over the years, with the ability to meet its short-term obligations effectively. However, the downward trend in the cash ratio may warrant further monitoring to ensure that the company has sufficient cash reserves to manage unforeseen financial challenges or opportunities.

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Additional liquidity measure

The cash conversion cycle of ResMed Inc has shown fluctuating trends over the past five years. In the most recent period ending June 30, 2024, the company's cash conversion cycle decreased to 135.25 days compared to the previous year where it stood at 173.20 days. This indicates an improvement in the company's efficiency in converting its investments in inventory into cash receipts from customers.

Looking further back, in the fiscal year ending June 30, 2022, ResMed Inc experienced a higher cash conversion cycle of 149.07 days compared to the prior year. However, there was a notable improvement in the fiscal year ending June 30, 2021, where the cash conversion cycle decreased to 124.59 days, reflecting more efficient management of working capital.

In analyzing the trend over the five-year period, we observe fluctuations in the cash conversion cycle with some years showing improvements and others exhibiting increases. This suggests that ResMed Inc has been undergoing varying levels of effectiveness in managing its inventory, accounts receivable, and accounts payable to optimize its cash flow cycle.

Overall, the trend in ResMed Inc's cash conversion cycle indicates a certain degree of volatility, highlighting the importance of closely monitoring the company's working capital management practices to ensure efficient operation and sustainable liquidity position.