AAR Corp (AIR)

Short-term

Turnover ratios

The activity ratios for AAR Corp, as analyzed over multiple periods, illustrate trends in inventory management, receivables collection, payables payment, and overall working capital efficiency.

Inventory Turnover:
The inventory turnover ratio exhibits relatively minor fluctuations within a narrow range, fluctuating approximately between 2.46 and 2.82 across the examined periods. The ratio's stability indicates that AAR maintains a consistent pace of inventory liquidation, with no significant acceleration or slowdown over time. The slight increase toward the most recent periods suggests marginal improvements in inventory management efficiency.

Receivables Turnover:
The receivables turnover ratio displays a decreasing trend from a high of 9.11 in August 2020 to a low of 5.30 in August 2024, indicating a gradual lengthening of the average collection period. Periodic recoveries, such as the increase to 6.28 in November 2023, suggest occasional improvements in collecting receivables. Overall, the declining trend signifies that AAR's collection efficiency has somewhat diminished, potentially reflecting extended credit terms or deteriorating receivables management.

Payables Turnover:
The payables turnover ratio is notably variable, with a high of 11.58 in November 2021 and a low of 7.16 in November 2024. The ratios generally hover between approximately 7.16 and 11.58, indicating fluctuating payment behaviors. Periods of higher ratios point to quicker payments to suppliers, whereas lower ratios imply extended payment periods. Variations may reflect strategic payment policies, supplier negotiations, or changes in operating cycles.

Working Capital Turnover:
The working capital turnover ratio remains relatively stable, ranging from roughly 2.50 to 2.91. The slight highest value appears in May 2025, suggesting marginal improvements in leveraging working capital to generate sales. The consistent level of this ratio indicates that AAR's use of working capital remains steady over time, reflecting stable operational efficiency.

Summary:
Overall, AAR Corp demonstrates consistent inventory management with minimal variation, though receivables collection efficiency has decreased over the period, suggesting extended receivable days. Accounts payable practices exhibit variability, possibly reflecting changes in cash management strategy or supplier terms. The working capital turnover remains stable, indicating steady operational leverage. Together, these activity ratios suggest a company maintaining stable inventory practices, with some room for improvement in receivables collection and possibly in optimizing payable terms to enhance overall operational efficiency.

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Average number of days

The activity ratios for AAR Corp, as measured by Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Days of Payables, exhibit certain trends and fluctuations over the analyzed period.

Days of Inventory on Hand (DOH):
The DOH fluctuated within a range of approximately 128.70 days to 148.08 days. Starting from about 128.70 days in August 2020, there was an upward trend reaching a peak of approximately 148.08 days in February 2021. Following this peak, the DOH experienced a gradual decline, with intermittent increases and decreases, settling around 131.53 days as of August 2023. Some increases are observed afterward, reaching over 142 days in May 2024 before slightly decreasing again. Overall, inventory holding periods show variability but generally hover around the low 130s days in recent periods.

Days of Sales Outstanding (DSO):
The DSO indicates receivables collection periods, which increased from about 40.05 days in August 2020 to a high of roughly 68.89 days in August 2024, before decreasing to 56.60 days by February 2024, then rising again slightly to 64.99 days in May 2025. This reflects a trend of gradually increasing receivables collection periods over time, with notable peaks around 66 days in August 2023 and over 68 days in August 2024, signalling longer collection cycles compared to early periods.

Number of Days of Payables:
The payables days fluctuate between approximately 31.53 days and 51.00 days. Initially, the company maintained payables periods in the lower 30s to mid-40s days, with some periods of extension above 47 days, notably in August and November 2023 and 2024. The recent data shows an increasing trend in the average days payable, reaching over 49 days in May 2025, indicating a tendency toward lengthening the time taken to settle payables.

Summary of activity pattern:
Overall, the analysis suggests AAR Corp has experienced a pattern of rising Days of Inventory on Hand and Days of Sales Outstanding over the examined period, indicating longer inventory holding and receivables collection times. Conversely, the days of payables show some fluctuation but tend to increase over time, implying longer periods to settle payables. These combined activity ratio trends may reflect strategic management of working capital, possibly relating to industry cycles, supply chain considerations, or changes in customer payment behaviors. The overall effect points toward a gradual elongation of the company's operating cycle, which warrants further context to understand its implications for liquidity and operational efficiency.

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Long-term

The analysis of AAR Corp's long-term activity ratios reveals significant insights into its asset utilization efficiency over the observed periods.

The Fixed Asset Turnover ratio, which measures how effectively a company utilizes its fixed assets to generate sales, exhibits considerable fluctuation across the timeline. In the early period (August 2020), the ratio was 9.08, indicating a high level of fixed asset efficiency. This ratio peaked at 16.61 in May 2022, nearly doubling the initial value, which suggests a period of optimal asset utilization, possibly driven by increased sales activity relative to fixed assets. Subsequently, the ratio declined sharply to 5.58 by August 2023, indicating a substantial reduction in fixed asset efficiency. This decline might be attributed to factors such as asset impairments, increased capital expenditures without immediate revenue realization, or operational inefficiencies. From the latest available data (November 2023), the ratio recovered somewhat to 9.73, suggesting an improvement in fixed asset utilization, yet it remains below the peak levels observed in 2022.

The Total Asset Turnover ratio, which reflects the overall efficiency in using all assets to generate sales, displays a relatively stable but gradually declining trend over the same period. Starting at 1.13 in August 2020, it decreased slightly over the subsequent periods, reaching approximately 1.09 in May 2023, and then experienced a notable decline to 0.84 in May 2024. The ratio appears to improve modestly thereafter, rising to 0.98 by May 2025, though it remains below initial levels. The decline indicates that AAR Corp has been generating less sales per dollar of total assets over time, possibly due to shifts in operational strategy, investment in less productive assets, or external market conditions affecting revenue generation.

In summary, while the Firm initially demonstrated strong asset utilization efficiency, recent fluctuations—most notably the sharp decline in fixed asset turnover and the overall decrease in total asset turnover—suggest challenges in maintaining previous levels of asset productivity. These shifts highlight periods of operational adjustment or strategic change, reflecting potential impacts of market dynamics, capital expenditure patterns, or asset impairments. Continuous monitoring of these ratios would be necessary to assess whether the company can restore or improve its long-term asset utilization efficiency going forward.