Analog Devices Inc (ADI)
Activity ratios
Short-term
Turnover ratios
| Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.73 | 4.79 | 5.74 | 3.86 | 5.26 |
| Receivables turnover | 7.06 | 8.20 | 6.56 | 4.75 | 7.33 |
| Payables turnover | 14.06 | 15.95 | 13.80 | 10.46 | 14.09 |
| Working capital turnover | 3.78 | 10.19 | 4.73 | 2.66 | 4.69 |
Analog Devices Inc's activity ratios indicate the efficiency of the company in managing its assets and liabilities.
1. Inventory turnover has been fluctuating over the years, reaching its peak in fiscal year 2022 at 5.74 and showing a slight decline to 4.73 in 2024. This ratio indicates that the company is turning over its inventory approximately 4 to 5 times a year, which suggests efficient inventory management.
2. Receivables turnover has also shown variability, with a high of 8.20 in 2023 and a low of 4.75 in 2021. The decreasing trend from 2022 to 2024 suggests that the company is collecting its receivables at a slower pace. However, the ratio of around 7 indicates that Analog Devices is collecting receivables approximately 7 times a year.
3. Payables turnover has also exhibited fluctuations, with a peak of 15.95 in 2023 and a low of 10.46 in 2021. The decrease in payables turnover from 2023 to 2024 could indicate that the company is taking longer to pay its suppliers. Nonetheless, the ratio of around 14 indicates that Analog Devices is paying its payables approximately 14 times a year.
4. Working capital turnover has shown a significant decrease from 10.19 in 2023 to 3.78 in 2024. This ratio measures the efficiency of the company in utilizing its working capital to generate sales. The decline indicates that Analog Devices generated lower sales relative to its working capital in 2024 compared to previous years.
Overall, while the activity ratios of Analog Devices Inc have exhibited some fluctuations, the company generally demonstrates efficient management of its inventory, receivables, and payables, although there may be areas for improvement, especially in working capital turnover.
Average number of days
| Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 77.12 | 76.23 | 63.58 | 94.52 | 69.34 |
| Days of sales outstanding (DSO) | days | 51.67 | 44.50 | 55.63 | 76.83 | 49.76 |
| Number of days of payables | days | 25.97 | 22.89 | 26.44 | 34.91 | 25.91 |
Analog Devices Inc's activity ratios reflect the efficiency of its operations in managing inventory, collecting receivables, and paying suppliers.
1. Days of Inventory on Hand (DOH):
- The trend in DOH shows fluctuations over the last five years, ranging from 63.58 days in 2022 to 94.52 days in 2021.
- In 2024, the company held inventory for an average of 77.12 days, which indicates a slight increase from the previous year.
- A higher DOH suggests that Analog Devices is taking longer to sell its inventory, tying up capital and potentially increasing carrying costs.
- Management may need to focus on inventory management strategies to reduce the number of days inventory is held in order to improve liquidity and efficiency.
2. Days of Sales Outstanding (DSO):
- DSO represents the average number of days it takes for the company to collect payment from its customers after making a sale.
- Analog Devices' DSO has fluctuated over the years, with an average of 51.67 days in 2024, showing an increase compared to the prior year.
- A higher DSO indicates that the company is taking longer to convert sales into cash, which may impact its cash flow and working capital management.
- Management might consider tightening credit policies or improving collection efforts to reduce DSO and enhance liquidity.
3. Number of Days of Payables:
- This ratio reflects the average number of days it takes for the company to pay its suppliers for goods or services received.
- Analog Devices' days of payables have been relatively stable, with an average of 25.97 days in 2024.
- A lower number of days of payables suggests that the company is paying its suppliers more quickly, which could indicate strong supplier relationships but may also impact cash flow.
- Management should strike a balance between managing relationships with suppliers and optimizing cash flow by ensuring timely payments without jeopardizing operational efficiency.
In summary, Analog Devices Inc should focus on optimizing its inventory turnover, receivables collection, and payables management to enhance operational efficiency, cash flow, and overall financial performance.
See also:
Analog Devices Inc Short-term (Operating) Activity Ratios
Long-term
| Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.76 | 3.74 | 4.92 | 3.50 | 4.83 |
| Total asset turnover | 0.20 | 0.25 | 0.23 | 0.13 | 0.25 |
Analog Devices Inc's fixed asset turnover ratio has been declining over the past five years, from 4.83 in 2020 to 2.76 in 2024. This indicates that the company is generating less revenue for every dollar invested in fixed assets.
Similarly, the total asset turnover ratio has also experienced fluctuations but generally shows a decreasing trend over the period. The ratio has decreased from 0.25 in 2020 to 0.20 in 2024, reflecting that the company is generating less revenue for every dollar of total assets.
Overall, these declining long-term activity ratios suggest that Analog Devices Inc may not be efficiently utilizing its fixed and total assets to generate sales, which could potentially impact the company's profitability and operational effectiveness in the long run.