Aramark Holdings (ARMK)

Short-term

Turnover ratios

Aramark Holdings' activity ratios provide insights into the efficiency of its operating cycle and management of working capital.

1. Inventory turnover: The inventory turnover ratio has shown a fluctuating trend over the past five years. In 2023, Aramark Holdings achieved an inventory turnover of 45.03 times, indicating that the company efficiently sold and replaced inventory almost 45 times during the year. This represents a significant improvement compared to previous years, suggesting better inventory management.

2. Receivables turnover: The receivables turnover ratio has also shown variability, with an upward trend in recent years. In 2023, Aramark Holdings achieved a receivables turnover of 9.77 times, reflecting the company's ability to collect outstanding receivables approximately 9.77 times during the year. This signifies an improvement in the collection efficiency of the company.

3. Payables turnover: The payables turnover ratio indicates how quickly the company is paying its suppliers. Aramark Holdings' payables turnover has been relatively stable over the years, with a slight increase in 2023 to 14.29. This suggests that the company is managing its payables effectively, paying suppliers approximately 14.29 times during the year.

4. Working capital turnover: The working capital turnover ratio measures the efficiency of a company in generating sales revenue from its working capital. Aramark Holdings' working capital turnover has shown significant fluctuations, with a notable increase to 101.32 in 2023. This indicates that the company generated sales revenue more efficiently relative to its working capital during the year.

Overall, Aramark Holdings has shown improvements in its inventory turnover, receivables turnover, and working capital turnover ratios, reflecting enhanced operational efficiency and working capital management. Additionally, the stability in the payables turnover ratio indicates effective management of supplier payments.

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Average number of days

Aramark Holdings' activity ratios provide insights into how efficiently the company manages its inventory, collects its receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
Aramark Holdings has shown a decreasing trend in its days of inventory on hand from 13.17 days in 2022 to 8.11 days in 2023. This suggests that the company has been more efficient in managing its inventory levels and converting inventory into sales. A lower DOH indicates better inventory management, which can lead to lower holding costs and reduced risk of obsolescence.

2. Days of Sales Outstanding (DSO):
The days of sales outstanding measure the average number of days it takes for Aramark Holdings to collect its accounts receivable. The decreasing trend in DSO from 54.00 days in 2021 to 37.35 days in 2023 indicates that the company has been improving its collection process and is able to convert credit sales into cash more quickly. A lower DSO reflects a more efficient credit policy and effective collection efforts.

3. Number of Days of Payables:
The number of days of payables measures the average number of days it takes for Aramark Holdings to pay its suppliers. The increasing trend in the number of days of payables from 19.02 days in 2020 to 25.54 days in 2023 indicates that the company is taking longer to settle its payables. This can sometimes indicate better cash flow management by extending payment terms, but it could also strain relationships with suppliers if not managed carefully.

Overall, the improving DOH and DSO ratios suggest that Aramark Holdings is becoming more efficient in managing its working capital, while the increasing number of days of payables may indicate a deliberate effort to manage cash flows. Further analysis of these ratios in conjunction with other financial metrics would provide a more comprehensive view of the company's operational efficiency.

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Long-term

The fixed asset turnover ratio for Aramark Holdings has shown a consistently increasing trend over the past five years, indicating that the company has been more efficient in generating sales revenue from its fixed assets. This suggests that Aramark has been utilizing its fixed assets effectively to generate revenue.

In contrast, the total asset turnover ratio has fluctuated over the same period but has generally increased. This could imply that the company has been improving its overall asset utilization efficiency in generating sales.

Overall, the increasing trend in both the fixed asset turnover and total asset turnover ratios suggests that Aramark Holdings has been effectively managing and utilizing its assets to generate revenue. This efficiency in asset utilization is a positive indicator of the company's operational performance and financial health over the years.