AGCO Corporation (AGCO)

Short-term

Turnover ratios

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

1. Inventory Turnover:
AGCO Corp.'s inventory turnover has been relatively stable over the past five years, ranging from 3.03 to 3.59. A higher inventory turnover ratio indicates that the company is selling its inventory more frequently, which is generally favorable as it reduces the risk of obsolete inventory and tied-up capital.

2. Receivables Turnover:
The receivables turnover for AGCO Corp. has shown a decreasing trend from 2019 to 2023, with figures ranging from 8.98 to 11.29. A lower receivables turnover may imply that the company takes longer to collect its receivables, potentially affecting its cash flow and liquidity.

3. Payables Turnover:
AGCO Corp.'s payables turnover has generally increased over the past five years, indicating that the company is taking longer to pay its suppliers. A higher payables turnover may suggest better liquidity management but could also indicate strained supplier relationships if payment terms are excessively long.

4. Working Capital Turnover:
The working capital turnover for AGCO Corp. has declined over the years, from 10.70 in 2019 to 7.22 in 2023. A lower working capital turnover suggests that the company is generating less revenue relative to its working capital, which could be a sign of inefficiency in utilizing its current assets to generate sales.

Overall, while AGCO Corp. has maintained a stable inventory turnover, there are some concerns regarding the decreasing receivables turnover and working capital turnover, which may require further investigation to understand the underlying reasons and implications for the company's operations and financial performance.

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Average number of days

AGCO Corp.'s activity ratios provide insights into the efficiency of its inventory management, accounts receivable collection, and accounts payable payment processes.

- Days of inventory on hand (DOH) measures how many days it takes for the company to sell its average inventory. AGCO's DOH has increased over the years from 107.51 days in 2019 to 118.09 days in 2023. This indicates that the company is taking longer to sell its inventory, which may tie up working capital and increase storage costs.

- Days of sales outstanding (DSO) reflects the average number of days it takes for AGCO to collect its accounts receivable. The trend in DSO has fluctuated, with an increase from 32.32 days in 2019 to 40.65 days in 2023. A higher DSO suggests a slower collection process, which could impact cash flow and liquidity.

- Number of days of payables indicates how long AGCO takes to pay its suppliers. The trend in payables days has fluctuated but generally has remained within a narrow range. The decrease in payables days from 47.31 days in 2019 to 41.44 days in 2023 indicates that the company is paying its suppliers more quickly.

Overall, AGCO Corp. should focus on improving its inventory management to reduce DOH and enhancing accounts receivable collection to lower DSO. Efficient management of these activity ratios can help improve cash flow and optimize working capital utilization.

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Long-term

Long-term activity ratios provide insight into the efficiency of AGCO Corp.'s utilization of its assets over multiple years.

1. Fixed Asset Turnover:
The fixed asset turnover ratio indicates how effectively AGCO Corp. generates sales revenue from its investment in fixed assets. Over the past five years, the company has shown consistency and improvement in this ratio, with values ranging from 6.07 to 7.95. In 2023, AGCO Corp.'s fixed asset turnover was 7.50, suggesting that the company generated $7.50 in sales for every dollar invested in fixed assets. This indicates efficient utilization of fixed assets to generate revenue.

2. Total Asset Turnover:
The total asset turnover ratio reflects AGCO Corp.'s overall efficiency in generating sales revenue from all its assets. The company's total asset turnover has fluctuated over the past five years, with values ranging from 1.08 to 1.26. In 2023, the total asset turnover was 1.26, indicating that the company generated $1.26 in sales for every dollar invested in total assets. This improvement suggests that AGCO Corp. has become more efficient in utilizing its total assets to generate revenue over time.

Overall, the trend in both fixed asset turnover and total asset turnover ratios demonstrates AGCO Corp.'s ability to efficiently generate sales revenue from its investment in assets, thereby enhancing the company's operational performance and profitability.