Arrow Electronics Inc (ARW)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 5.58 | 6.07 | 7.20 | 7.75 | 7.37 |
| Receivables turnover | 2.71 | 3.01 | 3.10 | 3.11 | 3.41 |
| Payables turnover | 2.88 | 3.09 | 3.15 | 3.21 | 3.64 |
| Working capital turnover | 6.44 | 6.24 | 7.55 | 7.13 | 6.78 |
Arrow Electronics Inc.'s inventory turnover has shown a decreasing trend over the past five years, from 7.37 in 2019 to 5.58 in 2023. This indicates that the company is selling its inventory at a slower pace in recent years.
The receivables turnover ratio has also been on a downward trajectory, declining from 3.41 in 2019 to 2.71 in 2023. This suggests that Arrow Electronics Inc. is taking longer to collect payments from its customers, which could potentially impact its cash flow.
Similarly, the payables turnover ratio has decreased from 3.64 in 2019 to 2.88 in 2023. A lower payables turnover ratio may indicate that the company is taking longer to pay its suppliers, which could affect its relationships with vendors.
On a positive note, the working capital turnover ratio has shown an increasing trend over the five-year period, rising from 6.78 in 2019 to 6.44 in 2023. This indicates that Arrow Electronics Inc. is generating more revenue relative to its working capital, which is a positive sign of efficiency in utilizing its assets to generate sales.
Overall, Arrow Electronics Inc. should closely monitor its inventory management, accounts receivable collection, and accounts payable payment processes to improve its activity ratios and enhance its overall operational efficiency.
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 | 65.38 | 60.13 | 50.66 | 47.09 | 49.54 |
| Days of sales outstanding (DSO) | days | 134.92 | 121.15 | 117.77 | 117.18 | 107.07 |
| Number of days of payables | days | 126.93 | 118.25 | 115.95 | 113.70 | 100.39 |
To analyze Arrow Electronics Inc.'s activity ratios, we will look at the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables over the past five years.
1. Days of Inventory on Hand (DOH):
- Arrow Electronics Inc.'s DOH has been showing an increasing trend over the past five years, which indicates that the company is holding inventory for a longer period before selling it.
- In 2023, the DOH increased to 65.38 days from 60.13 days in 2022, reflecting a potential inefficiency in managing inventory levels.
- This rise in DOH could suggest potential issues with inventory management, such as overstocking or slow-moving inventory.
2. Days of Sales Outstanding (DSO):
- The DSO for Arrow Electronics Inc. has been fluctuating over the last five years, with an overall increasing trend.
- In 2023, the DSO rose to 134.92 days from 121.15 days in 2022, indicating that the company is taking longer to collect its accounts receivable.
- A higher DSO could signify difficulties in collecting receivables promptly, potential issues with credit policies, or a customer base experiencing financial challenges.
3. Number of Days of Payables:
- Arrow Electronics Inc.'s Number of Days of Payables has also shown an increasing trend over the period under review.
- In 2023, the number of days of payables increased to 126.93 days from 118.25 days in 2022, suggesting that the company is taking more time to pay its suppliers.
- A prolonged payment period may indicate a strategic effort to manage cash flows, but it could also strain relationships with suppliers if not managed effectively.
In conclusion, Arrow Electronics Inc.'s activity ratios indicate potential inefficiencies in inventory management, challenges in collecting receivables, and a lengthening of the payment cycle to suppliers. It is important for the company to monitor and optimize these activity ratios to improve operational efficiency and overall financial performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 62.38 | 62.24 | 50.49 | 35.86 | 36.01 |
| Total asset turnover | 1.52 | 1.71 | 1.76 | 1.68 | 1.76 |
Arrow Electronics Inc.'s long-term activity ratios provide insights into the company's efficiency in utilizing its fixed assets and total assets to generate sales.
1. Fixed Asset Turnover:
- Arrow Electronics has shown a consistent improvement in its fixed asset turnover ratio over the past five years, indicating enhanced efficiency in utilizing its fixed assets to generate revenue.
- The ratio has significantly increased from 36.01 in 2019 to 62.38 in 2023, reflecting a consistent focus on optimizing the utilization of fixed assets.
- This ratio indicates that for every dollar invested in fixed assets, Arrow Electronics generated $62.38 in sales in 2023, showcasing the company's ability to effectively leverage its long-term assets to drive revenue growth.
2. Total Asset Turnover:
- While there has been some fluctuation in the total asset turnover ratio of Arrow Electronics over the years, it remained relatively stable, indicating a consistent level of efficiency in asset utilization.
- The ratio declined slightly from 1.76 in 2019 to 1.52 in 2023, possibly due to changes in the company's operating environment or asset structure.
- Despite the decrease, the company still managed to generate $1.52 in sales for every dollar invested in total assets in 2023, implying a reasonable level of productivity in utilizing all assets effectively to drive revenue.
Overall, Arrow Electronics Inc. has demonstrated a strong performance in terms of both fixed asset turnover and total asset turnover, implying efficient management of its long-term assets to generate revenue and drive business growth over the years. Investment in fixed assets has been particularly fruitful, with a notable increase in the fixed asset turnover ratio, indicating improved operational efficiency and asset utilization.