Archrock Inc (AROC)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 7.02 | 6.45 | 6.59 | 9.52 | 8.62 |
| Receivables turnover | 7.17 | 5.71 | 6.71 | 7.43 | 6.03 |
| Payables turnover | 9.41 | 8.48 | 12.34 | 19.67 | 10.66 |
| Working capital turnover | 14.57 | 9.41 | 11.47 | 11.03 | 9.34 |
The activity ratios of Archrock Inc provide insights into how efficiently the company manages its assets and liabilities to generate revenue.
1. Inventory turnover: The inventory turnover ratio measures how effectively Archrock is managing its inventory by indicating the number of times inventory is sold and replaced during a period. A higher ratio signifies efficient inventory management. Over the past five years, the inventory turnover has ranged from 4.93 to 6.13, with a clear increasing trend, reaching 5.49 in 2023.
2. Receivables turnover: This ratio reflects how quickly Archrock collects payments from its customers. A higher turnover indicates better credit policies and effective collection efforts. The company saw fluctuations in receivables turnover, ranging from 6.15 to 8.38, with a notable peak in 2020 at 8.38 before decreasing to 7.98 in 2023.
3. Payables turnover: The payables turnover ratio showcases how efficiently Archrock pays its suppliers. A higher ratio suggests the company is using its trade credit effectively. The payables turnover ranged from 6.52 to 12.24 over the past five years, indicating variations in payment terms with suppliers.
4. Working capital turnover: This ratio demonstrates how effectively Archrock utilizes its working capital to generate revenue. A higher turnover reflects efficient use of resources. The company's working capital turnover has increased steadily from 10.33 in 2019 to 16.23 in 2023, indicating improved efficiency in utilizing working capital for revenue generation.
Overall, the analysis of Archrock's activity ratios suggests a mix of efficiency levels in managing inventory, receivables, payables, and working capital over the past five years. The company has demonstrated improvements in certain areas such as inventory turnover and working capital turnover, which indicate enhanced operational efficiency and revenue generation.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 51.96 | 56.61 | 55.38 | 38.34 | 42.33 |
| Days of sales outstanding (DSO) | days | 50.94 | 63.97 | 54.44 | 49.12 | 60.56 |
| Number of days of payables | days | 38.78 | 43.03 | 29.58 | 18.56 | 34.23 |
Days of Inventory on Hand (DOH) measures how efficiently a company manages its inventory. A decreasing trend in this ratio over the years indicates that Archrock Inc has been managing its inventory more efficiently, turning over its inventory quicker. In 2023, the DOH decreased to 66.46 days from 73.63 days in 2022.
Days of Sales Outstanding (DSO) reflects how quickly a company collects its accounts receivable. A declining trend in DSO is favorable, indicating quicker collection of receivables. Archrock Inc's DSO decreased from 59.37 days in 2022 to 45.73 days in 2023, which suggests improvement in collecting receivables more promptly.
Number of Days of Payables analyzes how long a company takes to pay its suppliers. An increasing trend in this ratio may indicate that the company is taking longer to pay its suppliers, potentially signaling liquidity issues or strained relationships. Archrock Inc's number of days of payables increased from 55.97 days in 2022 to 49.61 days in 2023, showing a slower pace of paying suppliers compared to previous years.
Overall, the decreasing trend in DOH and DSO along with the increasing trend in the number of days of payables suggest that Archrock Inc has been more efficient in managing inventory and collecting receivables but is taking longer to pay its suppliers. Balancing these activity ratios is crucial for maintaining a healthy working capital cycle and overall financial health.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 0.39 | 0.36 | 0.32 | 0.32 | 0.34 |
| Total asset turnover | 0.33 | 0.30 | 0.27 | 0.28 | 0.28 |
The long-term activity ratios of Archrock Inc, as indicated by the fixed asset turnover and total asset turnover ratios, have shown some variability over the past five years. The fixed asset turnover ratio, which measures the efficiency of the company in generating sales from its fixed assets, has ranged from 0.35 to 0.43 during this period. This suggests that Archrock Inc has been able to slightly improve its utilization of fixed assets to generate revenue in 2023 compared to the previous years.
On the other hand, the total asset turnover ratio, which indicates how effectively the company is using all its assets to generate revenue, has fluctuated between 0.30 and 0.37 over the same period. This implies that Archrock Inc's overall asset utilization efficiency has also shown some improvement in 2023 compared to the previous years, albeit with some variability.
Overall, the trends in both the fixed asset turnover and total asset turnover ratios suggest that Archrock Inc has been working towards enhancing its efficiency in utilizing both its fixed and total assets to generate revenue. This improvement in asset turnover ratios may indicate better operational efficiency and potentially improved performance in the long term for the company.