ResMed Inc (RMD)

Liquidity ratios

Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020
Current ratio 3.41 3.33 2.92 2.59 3.04 3.11 2.99 3.12 3.07 3.17 2.94 2.80 2.55 2.49 2.54 1.73 1.67 2.51 2.61 2.53
Quick ratio 1.96 1.62 1.37 1.19 1.39 1.24 1.18 1.25 1.22 1.27 1.19 1.25 1.09 1.23 1.46 1.00 0.89 1.34 1.52 1.57
Cash ratio 0.99 0.61 0.47 0.27 0.34 0.29 0.29 0.32 0.32 0.35 0.30 0.41 0.33 0.34 0.50 0.32 0.29 0.44 0.72 0.77

ResMed Inc’s liquidity position over the provided period demonstrates a generally favorable and stable profile, though with some fluctuations that merit detailed examination.

Current Ratio Analysis:
The current ratio, which measures the company's ability to meet short-term obligations with its short-term assets, consistently remained above 1 throughout the period, indicating adequate liquidity. It fluctuated between a low of 1.67 on March 31, 2021, and a high of 3.41 on March 31, 2025. Notably, the ratio experienced a decline from over 2.5 in mid-2020 and early 2021 to a low point of 1.67 in March 2021, but subsequently increased and stabilized well above 2.5, reaching over 3.0 in late 2022 and 2023. The upward trend in recent periods suggests a strengthening in liquidity positions, possibly due to improved working capital management or cash reserves.

Quick Ratio Analysis:
The quick ratio, which excludes inventory and provides a more stringent measure of liquidity, also remained comfortably above 1 during the majority of the period. It experienced a dip below 1 on March 31, 2021, reaching as low as 0.89, reflecting a momentary tightening in liquid assets. However, it recovered subsequently, surpassing 1.2 from late 2022 onwards and reaching nearly 2.0 by March 2025. This upward trajectory indicates a robust ability to cover immediate liabilities with the most liquid assets, suggesting effective management of receivables and cash.

Cash Ratio Analysis:
The cash ratio, a conservative measure reflecting the company's ability to meet short-term liabilities with cash and cash equivalents alone, showed variability but remained generally below 1 until recent periods. It declined from 0.77 in June 2020 to the lowest of 0.27 in June 2024. However, in the latest period ending March 2025, it rose sharply to 0.99, approaching full liquidity coverage with cash alone. This indicates a significant strengthening of cash reserves relative to short-term obligations, reflecting improved cash management or actual liquidity enhancements.

Summary:
Overall, ResMed Inc’s liquidity ratios depict a company maintaining a solid liquidity buffer despite some fluctuations. The current ratio's trend underscores a sustained ability to meet short-term liabilities, with a recent increase suggesting improved liquidity management. The quick ratio confirms readiness to cover imminent obligations with liquid assets, while the rising cash ratio in recent periods indicates substantial cash reserves, positioning the company favorably for future operational needs or strategic initiatives. The period of relative stabilization and improvement in these ratios suggests prudent liquidity management and a resilient short-term financial position.


Additional liquidity measure

Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020
Cash conversion cycle days 178.18 180.26 180.22 178.74 192.43 202.71 216.26 226.54 239.04 242.87 221.81 196.09 173.99 163.04 149.81 155.90 165.53 160.91 161.35 143.47

The analysis of ResMed Inc.'s cash conversion cycle (CCC) reveals notable fluctuations over the analyzed period from June 30, 2020, through March 31, 2025. The CCC demonstrates the time span, measured in days, between the outlay of cash for inventory and the collection of cash from receivables, encompassing days inventory outstanding (DIO), days sales outstanding (DSO), and days payable outstanding (DPO).

Initially, the CCC was approximately 143.47 days in June 2020, gradually increasing to a peak of 242.87 days by December 2022. This upward trend indicates a lengthening of the cash conversion cycle, implying that the company took longer to convert its investments in inventory and receivables into cash over this period. The growth in CCC during 2021 and 2022 could be attributed to extended inventory holding periods, delayed receivables collection, or changes in payment terms with suppliers.

From December 2022 onward, the CCC starts to exhibit a decreasing trend, declining to approximately 202.71 days by December 2023, and further reducing to around 178.18 days by March 2025. This reduction suggests improved efficiency in working capital management, possibly due to streamlined inventory turnover, accelerated receivables collection, or lengthened payment terms to suppliers.

Throughout the period, the cyclical pattern indicates periods of operational adjustments or strategic shifts impacting cash flow timing. The recent decline points toward more efficient management of cash flows, which could positively influence liquidity and overall financial health. Overall, the company's cash conversion cycle has experienced significant fluctuations, with a trend towards shorter cycles in recent years, reflecting an improvement in operational efficiency.