American Electric Power Company Inc (AEP)

Short-term

Turnover ratios

American Electric Power Company Inc.'s activity ratios provide insights into the efficiency of its operations and management of its assets and liabilities.

- Inventory turnover has shown fluctuations over the years, ranging from 3.34 in 2020 to 5.53 in 2021. A higher inventory turnover indicates that the company is selling its inventory more quickly, which can be a positive sign of efficient inventory management.

- Receivables turnover has generally remained stable, with a slight increase from 8.10 in 2020 to 8.65 in 2021. This indicates that the company is collecting its receivables at a relatively consistent pace, which is important for maintaining cash flow.

- Payables turnover has shown a mostly increasing trend, indicating that the company is taking longer to pay its suppliers, which can be beneficial for cash flow management. The ratio increased from 2.45 in 2019 to 3.24 in 2023.

- Working capital turnover data is not available, so it's challenging to assess how efficiently the company is using its working capital to generate sales or revenue.

Overall, the trends in inventory turnover, receivables turnover, and payables turnover suggest that American Electric Power Company Inc. has been managing its assets and liabilities effectively to support its operational activities.

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Average number of days

The activity ratios of American Electric Power Company Inc. provide insights into the efficiency of its operations and management of inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- In 2023, the company had 104.28 days of inventory on hand, indicating that it took approximately 104 days to sell its inventory.
- The increase in DOH from 2022 to 2023 suggests that the company may be holding more inventory, which could tie up capital and impact liquidity.
- The fluctuation in DOH over the years indicates potential changes in inventory management practices that may require further investigation.

2. Days of Sales Outstanding (DSO):
- The DSO ratio measures how long it takes for the company to collect revenue after making a sale.
- American Electric Power had a DSO of 47.06 days in 2023, showing a relatively consistent collection period over the years.
- A lower DSO is generally viewed favorably as it indicates quicker cash conversion from sales, which can improve cash flow and working capital management.

3. Number of Days of Payables:
- The number of days of payables metric reflects how long the company takes to pay its suppliers.
- The decreasing trend in days of payables from 2020 to 2023 could suggest that American Electric Power is paying its suppliers more promptly.
- While managing payables efficiently is important for maintaining good supplier relationships, excessively reducing payables days could strain cash flow and liquidity.

Overall, by analyzing these activity ratios, stakeholders can assess American Electric Power's effectiveness in managing its inventory, receivables, and payables, providing valuable insights into the company's operational efficiency and financial health.

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Long-term

The long-term activity ratios of American Electric Power Company Inc. indicate how efficiently the company is utilizing its assets to generate revenue over successive years.

The fixed asset turnover ratio, which measures how effectively the company generates sales from its investments in fixed assets, has shown a fluctuating trend over the past five years. The ratio decreased from 0.26 in 2019 to 0.23 in 2020, indicating a slight dip in efficiency. However, it then improved to 0.25 in 2021, remained steady in 2022 at 0.28, and then fell slightly to 0.25 in 2023. Overall, the company is generating $0.25 in revenue for every $1 invested in fixed assets in 2023.

On the other hand, the total asset turnover ratio, which measures how efficiently the company is utilizing all its assets to generate sales, has also shown fluctuations over the years. The ratio decreased from 0.21 in 2019 to 0.18 in 2020, indicating a decrease in asset utilization efficiency. It then improved to 0.19 in 2021 and further to 0.21 in 2022. However, in 2023, the ratio declined to 0.20, suggesting a slight decrease in overall asset efficiency.

In conclusion, although there have been fluctuations in both the fixed asset turnover and total asset turnover ratios of American Electric Power Company Inc. over the past five years, the company has maintained a relatively stable performance in terms of generating revenue from its assets. Continuous monitoring of these ratios will be important to ensure efficient asset utilization and sustainable growth in the future.