Albemarle Corp (ALB)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.90 | 2.05 | 2.92 | 2.84 | 3.03 |
| Receivables turnover | 4.16 | 4.60 | 4.52 | 4.58 | 4.46 |
| Payables turnover | — | 2.77 | 3.88 | 4.42 | 4.06 |
| Working capital turnover | 5.81 | 2.99 | 27.89 | 7.74 | 4.40 |
Inventory Turnover Ratio: The inventory turnover ratio measures how efficiently a company manages its inventory. Albemarle Corp.'s inventory turnover has shown improvement over the years, increasing from 2.05 in 2019 to 3.90 in 2023. This indicates that the company is selling its inventory more quickly, which could be a positive sign for its operational efficiency.
Receivables Turnover Ratio: The receivables turnover ratio reflects how effectively a company collects its outstanding receivables. Albemarle Corp.'s receivables turnover has been relatively stable, ranging between 4.75 and 5.24 over the past five years. This suggests that the company has been successfully managing its accounts receivable collection process.
Payables Turnover Ratio: The payables turnover ratio assesses how efficiently a company pays its suppliers. Albemarle Corp.'s payables turnover has fluctuated but generally improved from 2019 to 2023, implying that the company is taking longer to pay its suppliers. This could indicate improved cash management or negotiation power.
Working Capital Turnover Ratio: The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate sales. Albemarle Corp.'s working capital turnover has varied significantly, with a notable spike in 2021 and a subsequent decline. The high ratio in 2021 suggests that the company was very efficient in generating sales using its working capital that year.
In conclusion, Albemarle Corp. has shown improvements in its inventory and payables turnover ratios, indicating better inventory management and possibly favorable payment terms with suppliers. The stability in receivables turnover suggests effective accounts receivable management. The fluctuation in working capital turnover highlights changes in how efficiently the company generates sales using its working capital over the years.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 93.56 | 178.48 | 125.11 | 128.32 | 120.38 |
| Days of sales outstanding (DSO) | days | 87.65 | 79.30 | 80.70 | 79.69 | 81.81 |
| Number of days of payables | days | — | 131.85 | 94.07 | 82.65 | 89.88 |
Albemarle Corp.'s activity ratios, specifically the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, provide insights into the efficiency of the company's operating cycle and management of working capital.
1. Days of Inventory on Hand (DOH):
- The DOH measures how many days, on average, inventory is held before being sold.
- In 2023, Albemarle Corp. improved its inventory management significantly, reducing the DOH to 93.56 days from 178.48 days in 2022.
- The trend indicates that the company is becoming more efficient in managing its inventory levels, which could result in lower holding costs and better cash flow management.
2. Days of Sales Outstanding (DSO):
- DSO represents the average number of days it takes for the company to collect revenue from its sales.
- Albemarle Corp. has shown a slight improvement in collection efficiency, with the DSO decreasing from 76.78 days in 2021 to 69.65 days in 2023.
- A lower DSO indicates that the company is collecting cash from its customers more quickly, which is a positive sign for liquidity and working capital management.
3. Number of Days of Payables:
- The number of days of payables showcases how long the company takes to pay its suppliers.
- Albemarle Corp. experienced an increase in the number of days of payables, from 82.65 days in 2020 to 90.39 days in 2023.
- A longer payment period may indicate that the company is improving its cash flow position by taking advantage of extended payment terms, but could also strain supplier relationships if not managed effectively.
Overall, Albemarle Corp. has shown improvements in its inventory and accounts receivable management, leading to increased efficiency in its operating cycle. However, the lengthening of the payables period should be monitored to ensure it does not negatively impact supplier relationships or operational effectiveness in the long run.
See also:
Albemarle Corp Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 1.02 | 1.05 | 0.56 | 0.58 | 0.73 |
| Total asset turnover | 0.53 | 0.47 | 0.30 | 0.30 | 0.36 |
The analysis of Albemarle Corp.'s long-term activity ratios reveals the following trends:
1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how efficiently the company generates sales from its investment in fixed assets.
- Over the past five years, Albemarle's fixed asset turnover ratio has fluctuated. It increased from 0.73 in 2019 to 1.05 in 2022, indicating a more efficient utilization of fixed assets.
- However, in 2023, the fixed asset turnover slightly decreased to 1.01, suggesting a slightly lower efficiency in generating sales from fixed assets compared to the previous year.
2. Total Asset Turnover:
- The total asset turnover ratio signifies how well the company utilizes its total assets to generate sales.
- Albemarle's total asset turnover has shown an increasing trend over the past five years, from 0.36 in 2019 to 0.53 in 2023.
- This indicates that the company is becoming more efficient in generating sales relative to its total asset base.
Overall, while Albemarle's fixed asset turnover ratio displayed fluctuations, the total asset turnover ratio exhibited a consistent increasing trend. These trends suggest that the company has been improving its efficiency in generating revenue in relation to both fixed assets and total assets over the past five years.