AAR Corp (AIR)

Short-term

Turnover ratios

The activity ratios of AAR Corp over the observed periods provide insights into the company's operational efficiency and working capital management.

Inventory Turnover:
The inventory turnover ratio demonstrated a gradual improvement from 2.55 times on May 31, 2021, to a peak of 2.82 times in 2023, indicating increasing efficiency in managing and converting inventory into sales during this period. Subsequently, there was a decline to 2.56 in 2024, suggesting a potential slowdown in inventory sales or accumulation, before data for 2025 reports zero, which may imply incomplete data or an accounting anomaly.

Receivables Turnover:
Receivables turnover ratios showed a declining trend from 6.92 in 2021 to 6.06 in 2023, with a further decrease to 5.65 in 2024, and marginally to 5.62 in 2025. This decline indicates a gradual lengthening of the collection period, implying that the company is taking more time to convert receivables into cash, which could impact liquidity.

Payables Turnover:
The payables turnover ratio decreased from 10.82 times in 2021 to 9.63 in 2022, then experienced an increase to 10.22 in 2023, reflecting a slight improvement in managing payables. The ratio further dropped to 7.88 in 2024, indicating a lengthening of the accounts payable period and possibly improved bargaining power or strategic delaying of payments. The 2025 data reports zero, which may suggest missing data or reclassification.

Working Capital Turnover:
The working capital turnover ratio remained relatively stable, with slight fluctuations: it was 2.75 in 2021, increased slightly to 2.76 in 2022, decreased marginally to 2.67 in 2023, then declined further to 2.51 in 2024, before increasing again to 2.91 in 2025. These figures suggest that the company's efficiency in utilizing working capital to generate sales has been relatively consistent, with minor variations.

Overall Summary:
The activity ratios depict a company with somewhat fluctuating operational efficiency. The inventory turnover improved through 2023 before declining, which could reflect inventory management issues or changes in sales volume. The receivables turnover indicates a lengthening receivables collection period, potentially affecting liquidity. The payables turnover suggests an initial improvement followed by a strategic prolongation of payment cycles. The stability in working capital turnover underscores consistent management of working capital relative to sales during the period analyzed. Notably, some data points for 2025 are missing or indicating zero, which warrants further investigation for clarification.

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Average number of days

The analysis of AAR Corp's activity ratios over the period from May 31, 2021, to May 31, 2024, reveals several notable trends.

Days of Inventory on Hand (DOH):
The DOH decreased from approximately 143.36 days in 2021 to 133.35 days in 2022, indicating an improvement in inventory management efficiency during that period. Subsequently, the DOH further declined to 129.32 days in 2023, suggesting continued effectiveness in managing inventory levels. However, a notable increase occurred in 2024, with DOH rising back to approximately 142.59 days. This reversal suggests a potential buildup in inventory or a change in inventory turnover strategies. The data for 2025 is unavailable, preventing further trend analysis.

Days of Sales Outstanding (DSO):
The DSO increased steadily over the period, from about 52.71 days in 2021 to 57.68 days in 2022, then to 60.18 days in 2023, and reaching 64.60 days in 2024. This upward trend indicates that the company is taking progressively longer to collect receivables, potentially reflecting a shift towards more lenient credit terms, longer payment cycles from customers, or challenges in receivables collection efficiency. The slight further increase to approximately 64.99 days in 2025 is projected, indicating this trend may persist if no corrective measures are implemented.

Number of Days of Payables:
The number of days of payables increased from 33.73 days in 2021 to 37.89 days in 2022, then decreased slightly to 35.70 days in 2023. In 2024, the payables period lengthened significantly to approximately 46.29 days, reflecting an extension in the time taken to settle liabilities, possibly as part of cash flow management strategies or negotiation of extended payment terms with suppliers. Data for 2025 is unavailable, leaving the trend incomplete.

Overall Interpretation:
The activity ratios indicate that AAR Corp has experienced a reduction in inventory levels per period until 2023, after which inventory levels increased again in 2024. The increasing DSO suggests declining receivables turnover efficiency, implying longer collection periods. Meanwhile, the payables period shows a trend of increasing in 2022 and 2024, potentially balancing the company's cash flow by delaying payments. Together, these trends suggest a shifting pattern in operational efficiency and cash management that warrants further scrutiny to ensure long-term operational health.

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Long-term

The long-term activity ratios for AAR Corp, specifically the Fixed Asset Turnover and Total Asset Turnover ratios, reveal trends in asset utilization efficiency over the analyzed period.

The Fixed Asset Turnover ratio experienced a substantial increase from 8.44 times as of May 31, 2021, to a peak of 16.61 times by May 31, 2022. This suggests that the company significantly improved its efficiency in generating sales from its fixed assets during this period. However, in the subsequent year, the ratio declined slightly to 15.79 times by May 31, 2023, indicating a minor decrease in fixed asset utilization, but overall maintaining a high level of efficiency relative to the earlier period. Data for fiscal years beyond May 31, 2023, are unavailable.

In terms of the Total Asset Turnover ratio, there is a modest upward trend from 1.07 in May 2021 to 1.16 in May 2022, reflecting improved overall efficiency in using total assets to generate sales. This upward movement is followed by a slight decrease to 1.09 in May 2023, representing a marginal reduction in total asset efficiency. The ratio then dips further to 0.84 by May 31, 2024, indicating a notable decrease in asset utilization efficiency. However, it shows partial recovery to 0.98 by May 31, 2025, approaching the earlier levels observed in the previous period.

Overall, the data indicate that AAR Corp enhanced its fixed asset efficiency markedly between 2021 and 2022, but this efficiency slightly waned in the subsequent years. The total asset turnover trend suggests a similar pattern of initial improvement followed by a decline, with some partial recovery. These fluctuations may reflect changes in operational effectiveness, asset management strategies, or broader market conditions affecting asset utilization efficiency over time.