Broadcom Inc (AVGO)

Activity ratios

Short-term

Turnover ratios

	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Nov 1, 2020	Nov 3, 2019
Inventory turnover	5.86	5.77	8.18	10.34	11.57
Receivables turnover	11.36	11.22	13.25	10.40	6.93
Payables turnover	9.20	11.13	9.77	12.41	11.83
Working capital turnover	2.66	2.90	2.66	4.32	7.49

Broadcom Inc's activity ratios, which are a measure of how effectively a company's resources are being utilized, provide insights into its inventory management, receivables and payables turnover, and working capital efficiency.

1. Inventory Turnover:
- Broadcom's inventory turnover has fluctuated over the past five years, with a peak of 7.69 in 2019 and a low of 4.29 in 2022. This ratio indicates how efficiently the company is managing its inventory to generate sales. An increasing trend would generally indicate improved efficiency in selling inventory.

2. Receivables Turnover:
- The receivables turnover ratio has shown a steady increase from 6.93 in 2019 to 11.36 in 2023. This suggests that Broadcom has been collecting its receivables more frequently over the years, reflecting effective management of credit and collection policies.

3. Payables Turnover:
- The payables turnover ratio has fluctuated over the years, indicating variations in the company's payment policies and relationships with suppliers. The decrease from 8.27 in 2022 to 7.66 in 2023 might suggest a longer payment cycle, possibly impacting relationships with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio has exhibited a downward trend. The significant decline from 7.49 in 2019 to 2.66 in 2023 might indicate that Broadcom is using its working capital less efficiently to generate revenue. This could signal potential inefficiencies in its use of current assets and liabilities.

Overall, the analysis of Broadcom Inc's activity ratios suggests some fluctuations in efficiency, with room for improvement in inventory management and working capital utilization. The company might benefit from optimizing its inventory levels, improving payment cycles, and strengthening its working capital management to enhance overall operational efficiency.

Average number of days

		Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Nov 1, 2020	Nov 3, 2019
Days of inventory on hand (DOH)	days	62.25	63.25	44.64	35.30	31.54
Days of sales outstanding (DSO)	days	32.14	32.52	27.54	35.10	52.64
Number of days of payables	days	39.68	32.79	37.37	29.42	30.86

Days of inventory on hand (DOH) measures the average number of days it takes for the company to sell its inventory. The trend for Broadcom Inc's DOH shows an increasing pattern over the past five years, indicating that the company has been holding its inventory for a longer period before selling it. This may suggest inefficiencies in the management of inventory or challenges in forecasting demand accurately.

Days of sales outstanding (DSO) measures the average number of days it takes for the company to collect its receivables. The trend for Broadcom Inc's DSO has been relatively stable over the past five years, with a slight increase in 2022. This suggests that the company has been consistent in collecting its receivables within a similar timeframe, which is a positive indicator of its accounts receivable management.

Number of days of payables measures the average number of days it takes for the company to pay its suppliers. The trend for Broadcom Inc's payables days shows some fluctuations, with an increasing trend from 2020 to 2021 and a slight decrease in 2022. This indicates that the company has been taking longer to pay its suppliers in recent years, which can be a strategy to manage cash flow or negotiate better terms with suppliers.

Overall, the activity ratios for Broadcom Inc show some areas of concern, particularly in the management of inventory, while the management of receivables and payables remains relatively stable. This analysis suggests potential opportunities for the company to improve inventory turnover and optimize its working capital management.

Long-term

	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Nov 1, 2020	Nov 3, 2019
Fixed asset turnover	16.63	14.94	11.69	9.52	8.81
Total asset turnover	0.49	0.45	0.36	0.31	0.33

The long-term activity ratios of Broadcom Inc, as indicated by the fixed asset turnover and total asset turnover, provide insights into the efficiency with which the company utilizes its assets to generate sales.

1. Fixed Asset Turnover:
The fixed asset turnover ratio measures the company's ability to generate sales using its fixed assets. A higher ratio indicates efficient utilization of fixed assets in generating revenue. Over the past five years, Broadcom Inc's fixed asset turnover has shown a consistent upward trend, increasing from 8.81 in 2019 to 16.63 in 2023. This substantial increase suggests improved efficiency in utilizing fixed assets to generate sales. It indicates that they are generating significantly more revenue per dollar invested in fixed assets, which reflects positively on the company's operational efficiency and asset management.

2. Total Asset Turnover:
The total asset turnover ratio reflects the company's ability to generate sales relative to its total assets. A higher total asset turnover ratio implies effective utilization of assets to generate sales. Broadcom Inc's total asset turnover has displayed a similar trend to the fixed asset turnover, showing a steady increase over the five years. The ratio has grown from 0.33 in 2019 to 0.49 in 2023. This upward trend indicates an improvement in the company's overall efficiency in utilizing its assets to generate sales.

In summary, the long-term activity ratios of Broadcom Inc, particularly the fixed asset turnover and total asset turnover, illustrate a positive trend in the company's ability to efficiently generate sales relative to its fixed and total assets. These trends indicate effective management of assets and operational efficiency, reflecting favorable prospects for Broadcom Inc's long-term growth and profitability.