Aramark Holdings (ARMK)

Short-term

Turnover ratios

Aramark Holdings' activity ratios provide insights into the efficiency of managing its inventory, receivables, payables, and working capital.

1. Inventory turnover:
- The inventory turnover has been consistently high over the years, indicating that Aramark efficiently sells its inventory multiple times within a year.
- The decreasing trend from 2024 to 2021 may suggest either better inventory management or slower sales activity.

2. Receivables turnover:
- The receivables turnover indicates how quickly Aramark collects payments from customers.
- The decreasing trend from 2023 to 2021 suggests a decrease in the efficiency of collecting receivables, which might be a concern.

3. Payables turnover:
- The payables turnover ratio shows how quickly Aramark pays off its suppliers.
- The decreasing trend from 2020 to 2022 indicates that Aramark is taking longer to pay its suppliers over the years, possibly affecting relationships with vendors.

4. Working capital turnover:
- The working capital turnover fluctuates significantly from year to year.
- The extremely high figure in 2022 indicates a substantial turnover of working capital, potentially due to changes in operational activities or management decisions.

In summary, Aramark's inventory turnover remains high, while receivables and payables turnover show some concerning trends. The working capital turnover's fluctuation may require further investigation to understand the underlying reasons.

---

Average number of days

The activity ratios for Aramark Holdings provide insights into the efficiency of its operations and management of working capital.

1. Days of Inventory on Hand (DOH): The trend in the DOH ratio shows that Aramark has been able to optimize its inventory management over the years. A lower number of days indicates that the company is managing its inventory efficiently, turning over stock more quickly which can reduce carrying costs and minimize stock obsolescence.

2. Days of Sales Outstanding (DSO): The DSO ratio measures how efficiently a company is collecting its accounts receivable. A decreasing trend in DSO, as seen in the data, indicates that Aramark has been improving its collection process, converting sales into cash at a faster rate. This efficiency in collections can enhance cash flows and working capital management.

3. Number of Days of Payables: The trend in the days of payables indicates the average number of days it takes for Aramark to pay its suppliers. A higher number of days may suggest that the company is taking advantage of trade credit terms or facing difficulties in meeting its payment obligations. However, it is essential to maintain a balance in payables to avoid straining supplier relationships.

Overall, the analysis of these activity ratios suggests that Aramark Holdings is effectively managing its inventory, accounts receivable, and accounts payable to optimize its working capital and operational efficiency. Continuous monitoring and improvement in these ratios can contribute to the company's financial health and sustainable growth.

---

Long-term

The long-term activity ratios of Aramark Holdings, as indicated by the fixed asset turnover and total asset turnover, show the efficiency of the company in generating sales from its assets over the past five years.

The fixed asset turnover ratio has experienced fluctuations over the years, ranging from a high of 13.51 in 2023 to a low of 5.80 in 2021. The ratio measures how effectively the company generates sales from its fixed assets. A higher ratio indicates better utilization of fixed assets to generate revenue. The significant increase in 2023 suggests that Aramark Holdings improved its efficiency in using fixed assets to generate sales but experienced a slight decline in 2024.

On the other hand, the total asset turnover ratio has generally shown an increasing trend over the same period. This ratio measures how efficiently the company generates sales from all its assets. A higher total asset turnover ratio indicates that the company effectively utilizes both fixed and current assets to generate revenue. Aramark Holdings has shown improvement in this aspect, with the ratio steadily increasing from 0.79 in 2020 to 1.37 in 2024.

Overall, the increasing trend in the total asset turnover ratio combined with fluctuations in the fixed asset turnover ratio suggests that Aramark Holdings has been more efficient in utilizing its total assets to generate sales over the years, indicating a positive trend in the company's long-term activity efficiency.