Arista Networks (ANET)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 1.68 | 1.43 | 1.67 | 2.25 | 2.41 |
| Receivables turnover | 6.14 | 5.72 | 4.75 | 5.71 | 5.96 |
| Payables turnover | 8.10 | 6.39 | 9.29 | 7.23 | 8.61 |
| Working capital turnover | 0.76 | 0.90 | 1.03 | 0.80 | 0.76 |
Arista Networks' activity ratios provide insights into the company's efficiency in managing its assets and liabilities.
1. Inventory Turnover:
- The inventory turnover ratio has declined from 2.41 in 2020 to 1.68 in 2024. This suggests that Arista Networks is selling its inventory at a slower rate. A lower turnover could indicate overstocking or potential inefficiencies in managing inventory.
2. Receivables Turnover:
- The receivables turnover ratio fluctuated over the years, from 5.96 in 2020 to 6.14 in 2024. This indicates that Arista Networks is collecting its receivables faster in recent years. A higher turnover suggests effective credit policies and timely collection of outstanding payments from customers.
3. Payables Turnover:
- The payables turnover ratio varied, with a peak in 2022 at 9.29 and a low in 2023 at 6.39. This could suggest changes in payment terms with suppliers or alterations in the company's cash management strategies.
4. Working Capital Turnover:
- The working capital turnover ratio ranged from 0.76 to 1.03 over the years. A higher turnover ratio means that Arista Networks is utilizing its working capital more efficiently to generate sales revenue. However, the fluctuation in this ratio indicates changes in the company's working capital management practices.
Overall, analyzing these activity ratios can provide valuable insights into Arista Networks' operational efficiency, inventory management, accounts receivable collection, and cash management strategies.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 216.81 | 255.26 | 217.99 | 161.89 | 151.54 |
| Days of sales outstanding (DSO) | days | 59.44 | 63.82 | 76.90 | 63.95 | 61.24 |
| Number of days of payables | days | 45.04 | 57.09 | 39.31 | 50.46 | 42.41 |
Arista Networks' activity ratios provide insight into how efficiently the company manages its inventory, receivables, and payables.
1. Days of Inventory on Hand (DOH):
- The DOH ratio measures how many days, on average, the company holds inventory before selling it. Arista Networks' DOH has increased over the years, from 151.54 days in 2020 to 216.81 days in 2024. A higher DOH may indicate overstocking or slowing sales.
2. Days of Sales Outstanding (DSO):
- DSO indicates the average number of days it takes for the company to collect revenues from its credit sales. Arista Networks' DSO fluctuated but generally remained within a reasonable range, decreasing from 61.24 days in 2020 to 59.44 days in 2024. A lower DSO suggests faster collection of receivables.
3. Number of Days of Payables:
- This ratio shows how many days the company takes to pay its suppliers. Arista Networks' number of days of payables also varied, decreasing from 42.41 days in 2020 to 45.04 days in 2024. A higher number of days of payables may indicate a more extended credit period with suppliers.
Overall, while the Days of Inventory on Hand increased significantly, indicating potential inventory management challenges, the company improved its collection of receivables and managed payable days within a reasonable range. The trends in these activity ratios suggest opportunities for Arista Networks to optimize its working capital management and enhance operational efficiency.
See also:
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 70.85 | 57.69 | 46.11 | 37.49 | 72.04 |
| Total asset turnover | 0.50 | 0.59 | 0.65 | 0.51 | 0.49 |
Based on the provided data, we can analyze the long-term activity ratios of Arista Networks using two key ratios: Fixed Asset Turnover and Total Asset Turnover.
1. Fixed Asset Turnover: This ratio measures how efficiently the company is generating sales from its fixed assets. A higher turnover ratio indicates that the company is utilizing its fixed assets more effectively to generate revenue. The trend for Arista Networks' Fixed Asset Turnover ratio over the years is as follows:
- December 31, 2020: 72.04
- December 31, 2021: 37.49
- December 31, 2022: 46.11
- December 31, 2023: 57.69
- December 31, 2024: 70.85
The company experienced fluctuations in its Fixed Asset Turnover ratio, with significant variations in some years, such as a drastic decrease in 2021 followed by an improving trend in subsequent years. Overall, the ratio indicates that Arista Networks has been able to efficiently generate sales from its fixed assets, with a notable peak in 2020.
2. Total Asset Turnover: This ratio evaluates how efficiently the company is utilizing all its assets to generate revenue. A higher Total Asset Turnover ratio suggests that the company is effectively using its total assets to produce sales. The trend for Arista Networks' Total Asset Turnover ratio over the years is as follows:
- December 31, 2020: 0.49
- December 31, 2021: 0.51
- December 31, 2022: 0.65
- December 31, 2023: 0.59
- December 31, 2024: 0.50
Arista Networks' Total Asset Turnover ratio has shown fluctuations over the years, with varying levels of efficiency in utilizing its total assets to generate sales. The ratio peaked in 2022, indicating a period of optimal asset utilization, followed by some decline in subsequent years.
In conclusion, the analysis of Arista Networks' long-term activity ratios suggests that the company has demonstrated varying degrees of efficiency in utilizing its fixed and total assets to drive sales over the years. It is important for stakeholders to monitor these ratios consistently to assess the company's operational performance and asset utilization efficiency.