Air Products and Chemicals Inc (APD)

Activity ratios

Short-term

Turnover ratios

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Inventory turnover	15.50	20.22	17.80	14.47	15.46
Receivables turnover	6.43	6.87	6.70	6.47	7.08
Payables turnover	8.33	9.28	10.97	10.73	11.56
Working capital turnover	9.66	4.51	1.85	1.41	3.19

Air Products & Chemicals Inc.'s activity ratios provide insights into the efficiency and effectiveness of the company's management of its assets and liabilities. Let's analyze each of the activity ratios provided:

1. Inventory Turnover: This ratio measures how many times the company's inventory is sold and replaced over a particular period. Air Products & Chemicals Inc.'s inventory turnover has been declining over the past few years, from 15.39 in 2019 to 13.55 in 2023. This indicates that the company is taking longer to sell its inventory, which could potentially lead to increased carrying costs and obsolescence risk.

2. Receivables Turnover: The receivables turnover ratio reflects how efficiently the company is collecting on its credit sales. Air Products & Chemicals Inc. has shown a slight improvement in this ratio from 6.60 in 2019 to 7.09 in 2023, suggesting that the company is collecting its receivables at a slightly faster pace.

3. Payables Turnover: The payables turnover ratio measures how quickly the company pays its suppliers. Air Products & Chemicals Inc.'s payables turnover has been declining steadily from 11.31 in 2019 to 7.28 in 2023. This may indicate that the company is taking longer to pay its suppliers, potentially affecting its relationship with them and impacting future credit terms.

4. Working Capital Turnover: This ratio measures how effectively the company is using its working capital to generate sales. Air Products & Chemicals Inc.'s working capital turnover has shown significant improvement, increasing from 3.19 in 2019 to 9.66 in 2023. This indicates that the company is efficiently utilizing its working capital to support its operations and generate revenue.

In summary, Air Products & Chemicals Inc. has exhibited mixed performance in its activity ratios. While the company has shown improvements in its receivables turnover and working capital turnover, there are areas of concern, particularly the declining inventory turnover and payables turnover. These trends suggest the need for further analysis to understand the underlying reasons and potential impacts on the company's overall financial performance.

Average number of days

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	23.55	18.05	20.50	25.22	23.60
Days of sales outstanding (DSO)	days	56.78	53.16	54.50	56.45	51.57
Number of days of payables	days	43.82	39.35	33.28	34.03	31.57

Days of inventory on hand (DOH) is a measure of the average number of days it takes for a company to sell its inventory. A higher number suggests that the company is taking longer to sell its inventory, which could indicate overstocking or slowing sales. Air Products & Chemicals Inc.'s DOH has increased over the past two years, from 20.10 days in 2022 to 26.93 days in 2023, indicating an increase in the time taken to sell inventory. This may be a cause for concern as it could tie up working capital and lead to higher storage and holding costs.

Days of sales outstanding (DSO) measures the average number of days it takes a company to collect revenue after a sale is made. A higher DSO indicates that the company is taking longer to collect on sales. Air Products & Chemicals Inc.'s DSO has decreased slightly, from 53.81 days in 2022 to 51.52 days in 2023, which could indicate an improvement in the company's credit and collection policies.

The number of days of payables measures the average number of days a company takes to pay its suppliers. An increasing trend in this ratio could suggest that the company is taking longer to pay its suppliers, which may indicate strained liquidity or cash flow issues. Air Products & Chemicals Inc.'s number of days of payables has increased from 43.80 days in 2022 to 50.12 days in 2023, which indicates that the company is taking longer to pay its suppliers. While this may benefit the company by preserving cash, it could strain supplier relationships if it continues to increase.

In conclusion, Air Products & Chemicals Inc. has seen a mixed trend in its activity ratios. The increase in DOH and the number of days of payables suggests potential issues with inventory management and supplier payment, while the slight improvement in DSO indicates better collection policies. These trends should be carefully monitored to ensure the company's operational efficiency and financial health.

Long-term

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Fixed asset turnover	0.72	0.90	0.78	0.74	0.86
Total asset turnover	0.39	0.47	0.38	0.35	0.47

The long-term activity ratios provide insight into the efficiency of Air Products & Chemicals Inc. in utilizing its fixed and total assets to generate sales.

Fixed Asset Turnover:
The fixed asset turnover ratio measures how effectively the company generates sales from its investment in fixed assets. The declining trend in the fixed asset turnover from 0.86 in 2019 to 0.72 in 2023 suggests that the company has become less efficient in utilizing its fixed assets to generate revenue. This may indicate underutilization of fixed assets or a decrease in sales relative to the investment in fixed assets. It is important for the company to assess the reasons behind this decline and look for strategies to improve the utilization of its fixed assets.

Total Asset Turnover:
The total asset turnover ratio reflects the company's ability to generate sales from its total assets. The decreasing trend in the total asset turnover from 0.47 in 2019 to 0.39 in 2023 indicates a declining efficiency in utilizing total assets to generate sales. This could be attributed to various factors such as underperforming assets, inefficient operations, or a decrease in sales relative to total assets. Air Products & Chemicals Inc. should focus on improving its operational efficiency and sales generation to effectively utilize its total assets.

In conclusion, the declining trends in both fixed asset turnover and total asset turnover ratios suggest a deteriorating efficiency in utilizing assets to generate sales. It is imperative for the company to evaluate the reasons for these declines and implement strategies to enhance asset utilization and overall operational efficiency.