The AES Corporation (AES)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its resources to generate sales and cash flows. Let's analyze the activity ratios of AES Corp. based on the data provided.

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company is managing its inventory by showing how many times the inventory is sold and replaced within a period.
- AES Corp.'s inventory turnover has fluctuated over the past five years, with a peak of 16.10 in 2019 and a low of 9.54 in 2022. The higher the inventory turnover, the better, as it indicates quicker sales and lower holding costs.

2. Receivables Turnover:
- The receivables turnover ratio assesses how well a company is collecting outstanding receivables from its customers.
- AES Corp.'s receivables turnover has shown an upward trend over the years, indicating that the company is collecting receivables more efficiently. A higher turnover implies that the company is collecting its receivables more quickly.

3. Payables Turnover:
- The payables turnover ratio helps in understanding how efficiently a company pays its suppliers.
- AES Corp.'s payables turnover has varied over the years, with a notable decrease in 2023 compared to the previous years. A higher payables turnover ratio might indicate that the company is paying its suppliers more quickly.

4. Working Capital Turnover:
- The working capital turnover ratio illustrates how effectively a company utilizes its working capital to generate sales.
- AES Corp.'s working capital turnover has shown significant fluctuations, especially in 2020 and 2021. The 2020 figure is unusually high and might be a result of specific circumstances. Generally, a higher working capital turnover suggests that a company efficiently uses its resources to generate revenue.

In conclusion, AES Corp. has shown variations in its activity ratios over the past five years, indicating changes in its operational efficiency and management of resources. Analyzing these ratios can help in assessing the company's performance and identifying areas for improvement in its working capital management and overall operational effectiveness.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities. Let's analyze the activity ratios of AES Corp. based on the data provided:

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows fluctuations over the years, with a decrease in 2023 compared to 2022. This indicates that AES Corp. managed its inventory more efficiently in 2023, holding inventory for 25.57 days on average.
- A lower DOH signifies a faster turnover of inventory, which can lead to reduced holding costs and potential obsolescence risks.

2. Days of Sales Outstanding (DSO):
- The DSO trend also shows fluctuations, with a decrease in 2023. AES Corp. collected receivables in approximately 40.91 days on average in 2023.
- A lower DSO indicates quicker collection of accounts receivable, improving cash flow and reducing the risk of bad debts.

3. Number of Days of Payables:
- The trend in the number of days of payables increased in 2023 compared to 2022. AES Corp. took approximately 78.97 days to pay its payables in 2023.
- An increase in payables days may indicate a shift towards a more extended payment period or potentially strained vendor relationships.

Overall, AES Corp.'s activity ratios suggest improvements in managing inventory and receivables in 2023. However, the increase in payables days could warrant further investigation to understand the company's payment strategy and its impact on liquidity and supplier relationships.

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Long-term

Based on the data provided for AES Corp.'s long-term activity ratios, we can see a trend of declining efficiency in utilizing its fixed assets over the past five years. The fixed asset turnover ratio has decreased from 0.45 in 2019 to 0.42 in 2023. This indicates that AES Corp. generated $0.42 in revenue for every dollar invested in fixed assets in 2023, reflecting a decline in operational efficiency in utilizing its long-term assets.

Similarly, the total asset turnover ratio has also experienced a downward trend, falling from 0.30 in 2019 to 0.28 in 2023. This implies that AES Corp. generated $0.28 in revenue for every dollar invested in total assets in 2023, suggesting a decrease in the overall efficiency of the company in generating sales from its total asset base.

The declining trend in both fixed asset turnover and total asset turnover ratios over the years may indicate inefficiencies in operational activities or a decrease in the revenue-generating capacity of the company relative to its asset base. It would be advisable for AES Corp. to further analyze the factors contributing to this decline and take corrective actions to improve its asset utilization efficiency for sustainable long-term performance.