Analog Devices Inc (ADI)

Short-term

Turnover ratios

Analog Devices Inc.'s activity ratios provide insight into the efficiency with which the company manages its assets and liabilities.

1. Inventory Turnover:
- The inventory turnover ratio has been relatively stable ranging from 2.61 to 3.82 over the past eight quarters.
- The company, on average, turns over its inventory approximately 2.95 times a year, with recent quarters showing a slight decline in inventory turnover.
- This may indicate that Analog Devices is holding onto its inventory for a longer period, which could tie up capital and potentially lead to obsolescence or inventory write-downs.

2. Receivables Turnover:
- The receivables turnover ratio has shown a generally increasing trend, indicating that the company has been collecting its receivables at a faster pace.
- The company's ability to convert its accounts receivable into cash has improved, with the ratio rising from 6.07 to 9.67 over the past eight quarters.
- This suggests effective credit management practices and a strong collection process in place at Analog Devices.

3. Payables Turnover:
- The payables turnover ratio has varied but remained relatively stable over the quarters, ranging from 7.62 to 10.91.
- Analog Devices is paying its suppliers approximately 8.7 times a year on average, with recent quarters showing an increasing trend in payables turnover.
- A higher payables turnover ratio may indicate that the company is efficiently managing its accounts payable and taking advantage of trade credit terms.

4. Working Capital Turnover:
- The working capital turnover ratio has fluctuated over the quarters, but the overall trend shows a general decline in efficiency from Q4 2022 to Q1 2024.
- Analog Devices generated sales approximately 6.71 times the amount of working capital on average over the past eight quarters.
- A decreasing trend in working capital turnover may indicate inefficiencies in managing working capital, potentially leading to liquidity issues or underutilization of resources.

In summary, while Analog Devices Inc. has demonstrated strengths in managing receivables and payables efficiently, there are areas of concern related to inventory management and working capital turnover that may warrant further analysis and attention from the company's management team.

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Average number of days

Analog Devices Inc.'s activity ratios provide insight into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH): The trend in DOH indicates that the company's inventory management has been fluctuating over the past quarters. The increase in DOH from Q3 2022 to Q2 2023 suggests a buildup of inventory, which may indicate slower sales or production inefficiencies. However, the decrease in DOH in Q4 2022 and Q1 2023 shows improved inventory turnover. Overall, the current DOH of around 130-140 days is relatively high and may warrant closer monitoring to avoid potential obsolescence or carrying costs.

2. Days of Sales Outstanding (DSO): The DSO trend reflects the average number of days it takes for the company to collect receivables. Analog Devices Inc. has shown a decreasing trend in DSO from Q2 2022 to Q1 2024, signaling improved efficiency in collecting payments from customers. A lower DSO indicates better cash flow management and a more liquid receivables situation.

3. Number of Days of Payables: The trend in the number of days of payables shows the average time the company takes to pay its suppliers. Analog Devices Inc. has maintained a relatively stable level of payables days over the past quarters, suggesting consistent payment practices. The decreasing trend in Q3 2022 to Q4 2023 indicates the company is paying suppliers more quickly, which could affect its cash conversion cycle and working capital management.

Overall, while Analog Devices Inc. has shown improvements in its collection of receivables and payment of suppliers, the company may need to focus on reducing its inventory levels to optimize working capital efficiency. Monitoring and managing these activity ratios can help ensure sustainable financial health and operational effectiveness.

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See also:

Analog Devices Inc Short-term (Operating) Activity Ratios (Quarterly Data)

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Long-term

Analog Devices Inc.'s long-term activity ratios, namely the fixed asset turnover and total asset turnover, indicate the efficiency with which the company utilizes its assets to generate sales.

The fixed asset turnover has been fluctuating over the past eight quarters, ranging from 3.52 to 5.09. The upward trend from Q1 2023 to Q1 2024 suggests an improvement in the company's ability to generate sales from its fixed assets. A fixed asset turnover above 1 indicates that the company is effectively utilizing its long-term assets to generate revenue, with higher ratios indicating greater efficiency.

On the other hand, the total asset turnover has been more stable, with values ranging from 0.19 to 0.26 in the same period. The stability in this ratio indicates consistent performance in generating sales relative to the total assets employed by the company. A total asset turnover below 1 signifies that the company is not maximizing the utilization of all its assets to generate revenue.

Overall, while the fixed asset turnover shows improvement and efficiency in utilizing long-term assets for revenue generation, the total asset turnover indicates that there is still room for optimization in utilizing all assets effectively. Further analysis and comparison with industry benchmarks would provide a more comprehensive understanding of Analog Devices Inc.'s performance in this aspect.

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See also:

Analog Devices Inc Long-term (Investment) Activity Ratios (Quarterly Data)