Smith AO Corporation (AOS)

Short-term

Turnover ratios

Based on the provided data on Smith AO Corporation's activity ratios, we observe the following trends:

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company manages its inventory. Smith AO Corporation's inventory turnover has decreased from 8.23 in 2020 to 5.89 in 2024. This decline indicates that the company is holding onto inventory for a longer period, which may suggest inefficiencies in managing inventory levels or slow-moving stock.

2. Receivables Turnover:
- The receivables turnover ratio reflects how quickly a company collects payments from its customers. Smith AO Corporation's receivables turnover has shown an increasing trend from 4.94 in 2020 to 7.05 in 2024. This uptrend indicates that the company has been able to collect payments from customers at a faster rate over the years, improving its cash flow and liquidity position.

3. Payables Turnover:
- The payables turnover ratio evaluates how effectively a company manages its payments to suppliers. Smith AO Corporation's payables turnover has increased gradually from 4.15 in 2020 to 5.32 in 2024. This rise suggests that the company is taking longer to settle its payables, potentially benefiting from extended payment terms or negotiating favorable terms with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how efficiently a company utilizes its working capital to generate revenue. Smith AO Corporation's working capital turnover has exhibited an upward trend, increasing from 3.95 in 2020 to 7.70 in 2024. This improvement signifies that the company has been able to generate more revenue for each unit of working capital invested, indicating effective utilization of resources.

In summary, Smith AO Corporation has seen varying trends in its activity ratios over the years. While improvements in receivables turnover and working capital turnover are positive indicators of efficiency and liquidity management, the declining inventory turnover ratio may signal potential inventory management challenges that the company may need to address to enhance operational performance.

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Average number of days

The analysis of Smith AO Corporation's activity ratios indicates changes in its efficiency in managing inventory, collecting receivables, and paying liabilities over the five-year period from 2020 to 2024.

1. Days of Inventory on Hand (DOH):
- Smith AO Corporation's Days of Inventory on Hand (DOH) increased from 44.35 days in 2020 to 62.02 days in 2024. This trend suggests that the company is holding inventory for a longer period before it is sold. It may indicate either slower inventory turnover or an increase in inventory levels.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding (DSO) decreased from 73.94 days in 2020 to 51.76 days in 2024. This decline signifies that the company has improved its efficiency in collecting accounts receivable. A lower DSO indicates that the company is collecting payments from customers more quickly.

3. Number of Days of Payables:
- The Number of Days of Payables decreased from 87.97 days in 2020 to 68.62 days in 2024. This reduction implies that the company is taking longer to pay its suppliers. A decrease in this ratio may indicate either improved payment terms negotiated with suppliers or financial difficulties leading to delayed payments.

Overall, the trends in these activity ratios show that Smith AO Corporation experienced changes in its inventory management, accounts receivable collection, and payment practices over the five-year period. By analyzing these ratios, stakeholders can assess the company's operational efficiency and potential impact on its financial performance.

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Long-term

Smith AO Corporation's long-term activity ratios indicate an improvement in efficiency over the years.

1. Fixed Asset Turnover: The company's fixed asset turnover has shown a consistent increase from 5.34 in 2020 to 6.07 in 2024. This signifies that the company is generating more revenue per dollar invested in fixed assets, reflecting improved efficiency in utilizing its long-term assets to generate sales.

2. Total Asset Turnover: Similarly, the total asset turnover ratio has also shown a positive trend, increasing from 0.91 in 2020 to 1.18 in 2024. This indicates that the company is generating more sales relative to its total assets, which suggests effective asset utilization and efficient operations.

Overall, the increasing trends in both fixed asset turnover and total asset turnover ratios suggest that Smith AO Corporation has been able to enhance its operational efficiency and maximize the utilization of its long-term assets to drive sales growth over the years.