Alcoa Corp (AA)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company manages its assets to generate sales and maintain liquidity.

1. Inventory turnover:
- Alcoa Corp's inventory turnover has fluctuated over the past five years, ranging from 4.21 to 5.70. A higher turnover indicates that the company is selling its inventory more frequently, which is generally favorable.
- The decreasing trend from 2019 to 2023 suggests a potential issue with inventory management efficiency, leading to slower inventory turnover.

2. Receivables turnover:
- The receivables turnover ratio depicts how quickly a company collects payments from its customers. Alcoa Corp has shown a consistent range of 13.06 to 16.70 over the five-year period, indicating a relatively efficient collection process.
- A higher turnover ratio suggests that Alcoa is effectively managing its credit and collection policies to convert credit sales into cash quickly.

3. Payables turnover:
- Payables turnover measures how efficiently a company pays its suppliers. Alcoa Corp's payables turnover has remained relatively stable between 5.47 and 5.81.
- A consistent payables turnover ratio indicates that Alcoa is maintaining a steady balance between managing its accounts payable and fulfilling its payment obligations.

4. Working capital turnover:
- The working capital turnover ratio assesses how effectively a company utilizes its working capital to generate sales. Alcoa Corp has shown fluctuations in this ratio over the five-year period, with a peak in 2019 and a subsequent decline and rebound in recent years.
- A higher turnover ratio suggests that Alcoa is efficiently using its working capital to support operations and drive revenue growth.

Overall, while Alcoa Corp's activity ratios demonstrate some fluctuations, the company appears to manage its assets and operations reasonably well to drive sales and maintain liquidity. Monitoring these ratios over time can provide further insights into the company's operational efficiency and financial health.

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Average number of days

Days of inventory on hand (DOH) measures how many days it takes for Alcoa Corp to sell its inventory. In 2023, the DOH decreased to 80.27 days from 86.75 days in 2022, indicating that the company managed its inventory more efficiently. However, the DOH is still higher compared to 2020 and 2019, suggesting that Alcoa Corp may need to focus on better inventory management.

Days of sales outstanding (DSO) reflects the average number of days it takes for Alcoa Corp to collect revenue after a sale. The DSO increased to 27.95 days in 2023 from 26.65 days in 2022, indicating a slight delay in collecting payments. Nevertheless, the DSO remains relatively stable over the years, reflecting consistent collection practices.

Number of days of payables quantifies how long it takes Alcoa Corp to pay its suppliers. In 2023, the days of payables increased to 63.75 days from 62.80 days in 2022, indicating a longer payment period. However, the trend is not significantly different from previous years, suggesting that the company's payment practices have remained relatively consistent.

Overall, Alcoa Corp's activity ratios indicate a need for ongoing monitoring of inventory levels, collection of receivables, and payment to suppliers to optimize operational efficiency and liquidity management.

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Long-term

The fixed asset turnover ratio for Alcoa Corp has shown a declining trend over the past five years, decreasing from 1.32 in 2019 to 1.56 in 2023. This indicates that the company generated $1.56 in sales for every $1 of fixed assets in 2023, compared to $1.32 in 2019. While the ratio has fluctuated slightly over the years, the overall trend suggests a decrease in the efficiency of utilizing fixed assets to generate sales.

On the other hand, the total asset turnover ratio has also exhibited a downward trend from 0.71 in 2019 to 0.75 in 2023. This ratio reflects the company's ability to generate sales for each dollar of total assets. The decreasing trend indicates that Alcoa Corp has become less efficient in utilizing its total assets to generate revenue over the years.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios suggests a decrease in asset efficiency for Alcoa Corp. It may indicate that the company is facing challenges in maximizing the productivity of its assets to generate revenue, and management may need to evaluate and potentially improve their asset utilization strategies to enhance overall operational performance.