ResMed Inc (RMD)

The liquidity ratios of ResMed Inc. over the observed period demonstrate a generally strong and stable financial position with respect to short-term liquidity. The current ratio, which measures the company's ability to cover its current liabilities with current assets, fluctuated within a range of approximately 1.67 to 3.44 from September 2020 through June 2025. Notably, the current ratio experienced a significant dip to 1.67 in March 2021 but quickly recovered and showed a steady upward trend thereafter, reaching a peak of 3.44 in June 2025. This indicates an improved capacity to meet short-term obligations as time progressed.

The quick ratio, excluding inventories and other less liquid assets, similarly reflected resilience, varying between 0.89 and 2.11 over the same period. The lows around early 2021 suggest some tightening in liquid assets relative to current liabilities, yet the ratio remains comfortably above 1, signifying the company's capacity to meet short-term liabilities with its most liquid assets. An upward movement starting in late 2023 and into 2024 facilitated reaching a high of 2.11 by June 2025, further emphasizing increasing liquidity in terms of quickly realizable assets.

Similarly, the cash ratio, which measures the company's ability to cover current liabilities solely with cash and cash equivalents, showed more variability. It declined to a low of 0.29 in September 2023 but thereafter exhibited a consistent upward trajectory, reaching 1.19 in June 2025. This indicates that the company's cash holdings relative to current liabilities have strengthened significantly toward the latter part of the period, approaching a level where cash alone can cover all short-term obligations.

Overall, ResMed Inc.'s liquidity ratios suggest that the company maintains robust liquidity positioning, with a notable improvement over time. The ascending trends in the current, quick, and cash ratios, particularly from late 2023 onwards, imply an enhanced capacity to meet short-term financial commitments and a favorable liquidity outlook.

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Additional liquidity measure

The analysis of ResMed Inc.'s cash conversion cycle (CCC) over the specified period reveals notable fluctuations and an overarching trend. At the close of September 2020, the CCC stood at approximately 160.19 days, indicating the number of days it takes for the company to convert its investments in inventory and receivables into cash, net of its payables.

Throughout 2020, the CCC remained relatively stable, oscillating narrowly around 160 days. However, starting in March 2021, the cycle lengthened modestly to approximately 165.53 days. This upward trend persisted, with the cycle decreasing slightly at the end of 2021 but then rising significantly in 2022, reaching a peak of approximately 242.87 days by the end of December 2022. This increase suggests a lengthening of the company's cash conversion process, potentially due to extended inventory holding periods, delayed receivables collections, or both.

In 2023, the CCC experienced a gradual decline from its peak, decreasing to about 216.26 days by September 2023 and further to 202.71 days by the end of 2023. This downward movement indicates some improvements in cash flow efficiency, although the cycle still remains relatively elevated compared to the initial levels observed in 2020.

The trend continued into 2024, with the CCC reducing further to around 180 days by March and June 2024, and maintaining a similar level at September 2024. By the end of 2024 and into mid-2025, the cycle stabilized around 180 days, reflecting a potential settlement into a more efficient cash conversion period but still longer than the pre-2021 levels.

Overall, the company's cash conversion cycle exhibited a considerable increase from 2020 reaching a peak in late 2022, followed by a gradual recovery through 2023 and into 2024-2025. This pattern could be indicative of strategic changes, supply chain considerations, or alterations in receivables and payables management affecting working capital efficiency. The data suggests that while there has been some progress toward reducing the CCC, the cycle remains extended relative to earlier periods, emphasizing potential areas for further optimization.