Applied Materials Inc (AMAT)

Activity ratios

Short-term

Turnover ratios

	Oct 27, 2024	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020
Inventory turnover	3.04	2.84	2.64	3.23	2.81
Receivables turnover	5.08	4.71	3.92	4.12	5.43
Payables turnover	10.49	11.01	8.93	9.46	9.77
Working capital turnover	2.13	2.23	2.99	2.34	1.90

The activity ratios of Applied Materials Inc provide insights into how efficiently the company is managing its resources in relation to its sales and operations.

1. Inventory turnover: Applied Materials Inc's inventory turnover has been relatively stable over the past five years, ranging from 2.64 to 3.23 times. This indicates that the company is efficiently managing its inventory levels and quickly converting its inventory into sales.

2. Receivables turnover: The receivables turnover ratio has fluctuated over the years, with a range of 3.92 to 5.43 times. A higher turnover ratio suggests that Applied Materials Inc is effectively collecting payments from its customers, which helps to improve cash flow and reduce the risk of bad debts.

3. Payables turnover: The payables turnover ratio has also varied but generally remained within a narrow range from 8.93 to 11.01 times. A higher payables turnover ratio indicates that the company is paying its suppliers promptly, which can enhance relationships and possibly negotiate better terms in the future.

4. Working capital turnover: Applied Materials Inc's working capital turnover has shown some fluctuations, ranging from 1.90 to 2.99 times. This ratio reflects how efficiently the company is utilizing its working capital to generate revenue. A higher turnover ratio suggests that the company is using its resources effectively to support its operations.

Overall, the activity ratios of Applied Materials Inc indicate that the company is managing its assets and resources efficiently to support its business operations and drive sales growth. It is important for the company to continue monitoring these ratios to ensure continued operational efficiency and financial stability.

Average number of days

		Oct 27, 2024	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020
Days of inventory on hand (DOH)	days	120.15	128.39	138.17	112.91	129.79
Days of sales outstanding (DSO)	days	71.91	77.48	93.13	88.68	67.25
Number of days of payables	days	34.80	33.15	40.88	38.57	37.37

Activity ratios measure how efficiently a company manages its resources and operations. In the case of Applied Materials Inc, we will focus on three key activity ratios: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- DOH measures how long on average inventory is held before being sold. A lower DOH indicates efficient inventory management.
- Applied Materials Inc's DOH has fluctuated over the years, with a peak of 138.17 days in 2022 and a low of 112.91 days in 2021.
- In 2024, the DOH was 120.15 days, which suggests that the company is holding inventory for a slightly shorter period compared to the previous year.

2. Days of Sales Outstanding (DSO):
- DSO reflects how long it takes on average for the company to collect revenue from sales. A lower DSO indicates better collection efficiency.
- Applied Materials Inc's DSO has varied, with a high of 93.13 days in 2022 and a low of 67.25 days in 2020.
- In 2024, the DSO was 71.91 days, which implies that the company is collecting sales revenue more quickly compared to the previous year.

3. Number of Days of Payables:
- This ratio represents the average number of days it takes for a company to pay its suppliers. A higher number of days indicates a slower payment process.
- Applied Materials Inc's number of days of payables has shown some fluctuations, with the highest at 40.88 days in 2022 and the lowest at 33.15 days in 2023.
- In 2024, the company's payables were settled in approximately 34.80 days, indicating a slightly longer payment period compared to the previous year.

Overall, the activity ratios of Applied Materials Inc suggest that the company has improved its inventory management and collections process in 2024, but experienced a slight increase in the time taken to settle payables. These trends can provide insights into the company's operational efficiency and financial health.

Long-term

	Oct 27, 2024	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020
Fixed asset turnover	8.14	9.65	11.09	11.80	10.57
Total asset turnover	0.79	0.86	0.96	0.88	0.76

The fixed asset turnover ratio measures how efficiently a company is utilizing its fixed assets to generate sales. Applied Materials Inc's fixed asset turnover has been decreasing over the past five years, which may indicate declining efficiency in utilizing its fixed assets to generate revenue. However, it is still relatively high, with a value of 8.14 for the latest fiscal year, which suggests that the company is generating significant sales relative to its investment in fixed assets.

The total asset turnover ratio reflects how effectively a company is using all its assets to generate revenue. Applied Materials Inc's total asset turnover has fluctuated over the past five years but has generally been lower than the industry average. The latest ratio of 0.79 indicates that the company generated $0.79 in sales for every dollar invested in total assets. This may suggest inefficiencies in utilizing its total assets to generate revenue compared to its industry peers.

Overall, while the fixed asset turnover ratio of Applied Materials Inc points to efficient utilization of fixed assets, the total asset turnover ratio suggests room for improvement in generating sales relative to its total asset base. Management should focus on optimizing the use of all assets to enhance overall operational efficiency and profitability.