Agilent Technologies Inc (A)

Short-term

Turnover ratios

Agilent Technologies Inc.'s activity ratios provide valuable insights into the efficiency of its asset management and working capital usage.

The inventory turnover ratio measures how effectively the company manages its inventory. Agilent's inventory turnover has shown a slight increase over the past five years, from 3.47 in 2019 to 3.27 in 2023, indicating that the company is selling its inventory more efficiently. However, the decrease in 2022 and subsequent increase in 2023 may signify fluctuations in sales or changes in inventory management practices.

The receivables turnover ratio reflects how well Agilent collects its outstanding receivables. The company has exhibited fluctuations in its receivables turnover, with a peak of 5.55 in 2019, followed by a decrease in 2020 and a subsequent increase in 2023 to 5.29. This suggests that Agilent has become more effective in collecting its receivables since 2020, with a positive trend in recent years.

The payables turnover ratio assesses how quickly the company pays its suppliers. Agilent's payables turnover has shown an increasing trend over the past five years, indicating that the company is taking longer to pay its suppliers. This may signify an improvement in its cash flow management or negotiating better credit terms with suppliers.

The working capital turnover ratio measures how efficiently Agilent utilizes its working capital in generating sales. The declining trend from 2019 to 2023 suggests that the company may be becoming less efficient in using its working capital to support sales. This could indicate potential issues with managing current assets and liabilities.

In conclusion, while Agilent Technologies Inc. has shown improvements in managing its inventory and collecting receivables, the increasing trend in payables turnover and declining working capital turnover raise some concerns about its working capital management. Further analysis in conjunction with other financial metrics would be necessary to gain a comprehensive view of the company's overall financial performance.

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Average number of days

Agilent Technologies Inc.'s activity ratios provide insights into the efficiency of the company's management of its inventory, receivables, and payables. These ratios help assess how well the company is utilizing its assets and managing its operating cycle.

Days of Inventory on Hand (DOH):
The DOH ratio measures the average number of days it takes for the company to sell its inventory. A lower DOH indicates efficient inventory turnover. From 2019 to 2023, Agilent has shown fluctuations in its DOH, with a notable increase in 2022, followed by a decrease in 2023. This suggests that in 2022, the company was holding inventory for a longer period, which may have been due to factors such as changing demand patterns or production issues. However, the decrease in 2023 signifies improvements in inventory management efficiency.

Days of Sales Outstanding (DSO):
The DSO ratio reflects the average number of days it takes for the company to collect payment from its customers. A lower DSO indicates quicker collection of receivables. Agilent's DSO has fluctuated over the past five years, indicating varying efficiency in collecting receivables. The increase in 2022 and 2023 compared to 2021 signals a potential challenge in timely collection of payments, which could lead to increased working capital requirements and liquidity concerns.

Number of Days of Payables:
The number of days of payables measures how long it takes for a company to pay its suppliers. A higher number indicates a longer payment period. Agilent has exhibited a significant decrease in the number of days of payables in 2023 compared to 2022, indicating that the company has been paying its suppliers more quickly. This could potentially strain the company's cash flow and liquidity position.

Overall, Agilent's activity ratios reflect variability in the management of its working capital components over the past five years. While the company has made improvements in inventory turnover, there are indications of challenges in collecting receivables and adjusting payment periods to suppliers. It would be important for Agilent to focus on maintaining a balance among these components to ensure efficient working capital management and sustainable operations.

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Long-term

The long-term activity ratios provide insights into how efficiently Agilent Technologies Inc. is utilizing its assets to generate sales and the utilization of fixed assets in revenue generation.

Firstly, let's analyze the fixed asset turnover. This ratio indicates the effectiveness of Agilent Technologies' use of fixed assets to generate sales. The consistent decline in the fixed asset turnover ratio from 2019 to 2023, decreasing from 6.07 to 5.38, suggests that the company is becoming slightly less effective in generating sales from its fixed assets. This could be due to slower growth in revenue compared to the growth in fixed assets, signaling potential inefficiencies in the use of fixed assets.

Secondly, looking at the total asset turnover, which measures the company's ability to generate sales from its total assets, Agilent Technologies Inc. has shown a relatively stable but slightly fluctuating trend from 2019 to 2023. The total asset turnover has ranged between 0.55 and 0.65 during these years, indicating that the company is consistently generating sales from its total assets. However, the decreasing trend from 2021 to 2023, dropping from 0.59 to 0.63, suggests that the company's efficiency in utilizing its total assets to generate sales has marginally decreased.

In summary, the long-term activity ratios indicate that Agilent Technologies Inc. experienced declining efficiency in utilizing both fixed assets and total assets to generate sales, although the company continues to show effectiveness in asset utilization. It is essential for the company to assess and improve its asset utilization efficiency to drive sustainable sales growth in the long term.