Applied Materials Inc (AMAT)

Activity ratios

Short-term

Turnover ratios

	Oct 31, 2024	Oct 27, 2024	Oct 31, 2023	Oct 29, 2023	Oct 31, 2022
Inventory turnover	2.63	3.04	2.47	2.84	2.33
Receivables turnover	—	5.08	—	4.71	—
Payables turnover	—	10.49	—	11.01	—
Working capital turnover	2.13	2.13	2.25	2.23	3.02

Applied Materials Inc's activity ratios show fluctuations in how efficiently the company manages its assets and liabilities over the years.

1. Inventory Turnover:
- The inventory turnover ratio has improved from 2.33 in October 31, 2022, to 3.04 in October 27, 2024. This indicates that the company is selling its inventory more frequently, which is positive for liquidity.

2. Receivables Turnover:
- There is missing data for receivables turnover in certain periods, making it challenging to assess the efficiency of collecting receivables. However, the improving trend from 4.71 in October 29, 2023, to 5.08 in October 27, 2024, indicates the company is collecting receivables at a quicker rate.

3. Payables Turnover:
- Similar to receivables turnover, there is missing data for payables turnover in certain periods. The trend shows a stable performance with payables turnover being around 10 in recent years, suggesting efficient management of accounts payable.

4. Working Capital Turnover:
- The working capital turnover has decreased slightly from 3.02 in October 31, 2022, to 2.13 in October 31, 2024. This could indicate that the company is generating less revenue per dollar of working capital. It is essential for the company to monitor this ratio to ensure efficient utilization of working capital.

Overall, Applied Materials Inc has shown improvements in managing inventory and collecting receivables efficiently, while maintaining stability in handling payables. However, the decreasing trend in working capital turnover warrants further attention to optimize resource utilization.

Average number of days

		Oct 31, 2024	Oct 27, 2024	Oct 31, 2023	Oct 29, 2023	Oct 31, 2022
Days of inventory on hand (DOH)	days	138.57	120.15	147.85	128.39	156.99
Days of sales outstanding (DSO)	days	—	71.91	—	77.48	—
Number of days of payables	days	—	34.80	—	33.15	—

From the provided data, we can analyze the activity ratios of Applied Materials Inc:

1. Days of Inventory on Hand (DOH):
- As of October 31, 2022, the company held inventory for an average of 156.99 days before selling it.
- By October 31, 2024, the DOH decreased to 138.57 days, indicating an improvement in inventory turnover efficiency.

2. Days of Sales Outstanding (DSO):
- DSO measures how many days it takes for the company to collect revenue after a sale.
- Applied Materials Inc did not have data available for DSO as of October 31, 2022 and October 31, 2023.
- As of October 29, 2023, the DSO was 77.48 days, which reduced to 71.91 days by October 27, 2024.
- A lower DSO suggests that the company is more effective in collecting revenue from customers.

3. Number of Days of Payables:
- This ratio represents the average number of days it takes for a company to pay its suppliers.
- Applied Materials Inc did not provide data for the number of days of payables as of October 31, 2022 and October 31, 2023.
- By October 29, 2023, the company took 33.15 days on average to pay its suppliers, increasing to 34.80 days by October 27, 2024.
- An increase in payables days may indicate that the company is taking longer to settle its payables, which could have implications for cash flow management.

Overall, analyzing these activity ratios provides insights into how efficiently Applied Materials Inc manages its inventory, collects revenue, and pays its suppliers.

Long-term

	Oct 31, 2024	Oct 27, 2024	Oct 31, 2023	Oct 29, 2023	Oct 31, 2022
Fixed asset turnover	—	8.14	9.74	9.65	11.18
Total asset turnover	0.79	0.79	0.86	0.86	0.96

The fixed asset turnover ratio is a measure of how efficiently a company is utilizing its fixed assets to generate sales. Applied Materials Inc's fixed asset turnover ratio has been gradually decreasing over the years, from 11.18 in October 2022 to 9.65 in October 2023, and further to 9.74 in October 2023, before dropping significantly to 8.14 in October 2024. This declining trend indicates a decrease in the company's ability to generate sales in relation to its investment in fixed assets.

On the other hand, the total asset turnover ratio reflects how effectively a company is utilizing all its assets to generate revenue. Applied Materials Inc's total asset turnover has also witnessed a decline, starting at 0.96 in October 2022, dropping to 0.86 in October 2023, and remaining at the same level in October 2023. Subsequently, it decreased further to 0.79 in both October 27, 2024, and October 31, 2024. This decreasing trend suggests that the company is experiencing challenges in effectively leveraging its total assets to generate sales.

In summary, both the fixed asset turnover and total asset turnover ratios for Applied Materials Inc have been declining over the years, indicating a decreasing efficiency in utilizing fixed assets and total assets to generate revenue. The company may need to reassess its asset utilization strategies to enhance operational efficiency and improve its overall financial performance.