Allete Inc (ALE)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company is managing its assets and liabilities to generate revenue. Here is a detailed analysis of Allete, Inc.'s activity ratios:

1. Inventory Turnover:
- Allete's inventory turnover has shown fluctuating trends over the past five years. In 2023, the ratio has significantly improved to 5.45 from 1.60 in 2022, indicating that the company is selling its inventory more quickly. This suggests improved inventory management efficiency and potentially lower holding costs.

2. Receivables Turnover:
- The receivables turnover ratio has generally been stable over the years, with a slight increase in 2023 to 13.70. This indicates that Allete is collecting its accounts receivable more efficiently, possibly through effective credit management or timely collection efforts.

3. Payables Turnover:
- Allete's payables turnover has been gradually increasing over the years, reaching 9.36 in 2023. This indicates that the company is taking longer to pay its suppliers, which could be beneficial for managing cash flow and working capital.

4. Working Capital Turnover:
- The working capital turnover in 2023 is significantly improved compared to the previous year, standing at 20.77. This indicates that Allete is generating more revenue per dollar of working capital employed, showcasing efficient utilization of resources to drive sales.

In conclusion, Allete, Inc. has shown improvements in its activity ratios, particularly in inventory turnover and working capital turnover, reflecting enhanced efficiency in managing its assets and operational processes. However, the company may need to closely monitor payables turnover to maintain good relationships with suppliers while optimizing cash flow.

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Average number of days

Analyzing Allete, Inc.'s activity ratios over the past five years, we can observe the following trends:

1. Days of Inventory on Hand (DOH):
- The DOH ratio fluctuated over the period, ranging from as low as 56.38 days in 2019 to as high as 228.48 days in 2022.
- A decreasing trend is noticeable from 2020 to 2021, indicating that Allete managed its inventory more efficiently during that period.
- However, the significant spike in 2022 suggests a possible overstocking issue that might have impacted the company's liquidity and profitability.

2. Days of Sales Outstanding (DSO):
- The DSO ratio remained relatively stable, with the number of days to collect receivables ranging from 26.64 days in 2023 to 34.94 days in 2020.
- This consistency suggests that Allete has been effective in managing its accounts receivable and collecting payments in a timely manner.

3. Number of Days of Payables:
- Allete's days of payables show an improving trend over the years, decreasing from 127.94 days in 2019 to 39.00 days in 2023.
- This decrease indicates that the company has been taking longer to settle its payables, potentially improving its cash flow position and relationship with suppliers.

Overall, the company's activity ratios reflect a mixed performance in managing its working capital components. While there are areas of improvement, such as the decreasing days of payables, Allete needs to address the inventory management issues highlighted by the fluctuating DOH ratio to optimize its operational efficiency and financial performance.

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Long-term

The long-term activity ratios for Allete, Inc. provide valuable insights into the efficiency of the company in generating sales from its fixed assets and total assets over the past five years.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio indicates how well the company utilizes its fixed assets to generate revenue. Allete, Inc. has shown an increasing trend in this ratio from 0.28 in 2019 to 0.37 in 2023, suggesting that the company has been more efficient in utilizing its fixed assets to generate sales.
- The improvement in the fixed asset turnover ratio indicates that Allete, Inc. has been able to increase its revenue generation without a proportionate increase in its investment in fixed assets, showcasing improved asset utilization efficiency.

2. Total Asset Turnover:
- The total asset turnover ratio reflects the company's ability to generate sales from all its assets. Allete, Inc. has also exhibited an upward trend in this ratio from 0.23 in 2019 to 0.28 in 2023, indicating a positive trend in the efficient use of all assets to generate revenue.
- The increasing total asset turnover ratio suggests that Allete, Inc. has been able to generate more revenue relative to its total asset base, which can be a sign of improved operational efficiency and effective management of assets.

Overall, the improving trends in both fixed asset turnover and total asset turnover ratios reflect Allete, Inc.'s efforts to enhance operational efficiency and maximize revenue generation from its asset base over the years. These ratios indicate that the company has been successful in effectively utilizing its assets to drive sales growth and improve overall financial performance.