Arrow Electronics Inc (ARW)

Short-term

Turnover ratios

The activity ratios of Arrow Electronics Inc provide insights into how efficiently the company manages its assets and liabilities to generate sales and operate its business. Let's analyze each ratio based on the provided data:

1. Inventory Turnover:
- Arrow Electronics Inc's inventory turnover ratio has shown a declining trend over the years, decreasing from 7.75 in 2020 to 5.23 in 2024. This indicates that the company is selling its inventory at a slower rate compared to the previous years. It may suggest potential issues with inventory management or slower sales growth.

2. Receivables Turnover:
- The receivables turnover ratio has also decreased consistently from 3.11 in 2020 to 2.14 in 2024. This suggests that the company is taking longer to collect payments from its customers, which could impact its cash flow and liquidity position.

3. Payables Turnover:
- Arrow Electronics Inc's payables turnover ratio has followed a downward trend, dropping from 3.21 in 2020 to 2.23 in 2024. A decreasing payables turnover ratio may indicate that the company is taking longer to pay its suppliers, which could strain its relationships with vendors or signal potential financial difficulties.

4. Working Capital Turnover:
- The working capital turnover ratio has also experienced a decline over the years, falling from 7.13 in 2020 to 4.84 in 2024. A decreasing working capital turnover ratio may suggest inefficiencies in managing the company's working capital, which could impact its overall operational efficiency and profitability.

Overall, the downward trends in these activity ratios for Arrow Electronics Inc indicate potential challenges in managing its assets, liabilities, and operations effectively. It may be essential for the company to focus on improving inventory management, receivables collection, payables efficiency, and working capital utilization to enhance its financial performance and competitiveness in the market.

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Average number of days

Based on the provided data for Arrow Electronics Inc, we can analyze the activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- The company's DOH has increased steadily over the years, from 47.09 days in December 2020 to 69.79 days in December 2024.
- The increasing trend in DOH indicates that Arrow Electronics is holding inventory for a longer period before it is sold.
- A higher DOH value may signify inefficiencies in inventory management or potential risks of obsolescence.

2. Days of Sales Outstanding (DSO):
- The DSO for Arrow Electronics has also shown a consistent increase from 117.18 days in December 2020 to 170.33 days in December 2024.
- The rising trend in DSO suggests that the company is taking more time to collect payments from customers.
- A higher DSO value may indicate issues with credit policies, collection practices, or potential difficulties in converting sales into cash.

3. Number of Days of Payables:
- The number of days of payables for Arrow Electronics has been on an upward trajectory, from 113.70 days in December 2020 to 163.71 days in December 2024.
- The increase in the days of payables indicates that the company is taking longer to settle its payables to suppliers.
- A longer payables period may suggest favorable terms with suppliers but could also signal liquidity concerns if not managed effectively.

Overall, the analysis of Arrow Electronics Inc's activity ratios reveals potential concerns regarding the management of inventory, accounts receivable, and accounts payable. It is essential for the company to closely monitor and address these trends to optimize working capital efficiency and maintain healthy cash flows.

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Long-term

Arrow Electronics Inc has experienced a significant improvement in its fixed asset turnover ratio over the past five years, increasing from 35.86 in 2020 to 59.50 in 2024. This indicates that the company has been able to generate more revenue from its fixed assets over the years, which is a positive sign of operational efficiency and effective utilization of its long-term assets.

In contrast, the total asset turnover ratio shows a fluctuating trend, with a peak of 1.76 in 2021 and a low of 1.28 in 2024. The downward trend in this ratio suggests that Arrow Electronics may be experiencing challenges in generating revenue relative to its total asset base.

Overall, while the company has shown a strong improvement in its fixed asset turnover, it may need to focus on effectively utilizing its total assets to drive revenue growth and overall operational efficiency in the long term.