Avanos Medical Inc (AVNS)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.17 | 5.63 | 4.57 | 4.41 | 4.90 |
| Receivables turnover | 4.11 | 4.82 | 5.65 | 4.16 | 4.17 |
| Payables turnover | 12.10 | 10.98 | 12.90 | 11.03 | 8.61 |
| Working capital turnover | 2.33 | 1.87 | 2.57 | 2.32 | 2.09 |
Avanos Medical Inc's activity ratios provide insights into the efficiency of the company's operations in managing its assets and liabilities.
Inventory turnover has been declining over the past five years, indicating that Avanos is generating less sales revenue relative to its inventory levels. This may suggest potential issues with inventory management and could lead to higher carrying costs or obsolescence.
On the other hand, receivables turnover has shown a relatively stable trend, reflecting the company's ability to collect outstanding receivables in a timely manner. A higher turnover ratio indicates that Avanos efficiently converts its credit sales into cash.
Payables turnover has generally been increasing, which suggests that the company is taking longer to pay its suppliers. While this may improve cash flow in the short term, it could strain relationships with suppliers if payment terms become excessively extended.
Working capital turnover has also been on an upward trend, indicating that the company is generating more sales revenue per dollar of working capital employed. This suggests improved efficiency in the utilization of working capital to support sales growth.
Overall, Avanos Medical Inc should focus on improving inventory turnover, optimizing payables management, and maintaining efficient collection of receivables to enhance its operational effectiveness and financial performance.
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 | 87.46 | 64.78 | 79.89 | 82.72 | 74.53 |
| Days of sales outstanding (DSO) | days | 88.72 | 75.66 | 64.60 | 87.64 | 87.59 |
| Number of days of payables | days | 30.17 | 33.25 | 28.29 | 33.11 | 42.40 |
The activity ratios of Avanos Medical Inc provide insight into the efficiency of the company's operations in managing its inventory, receivables, and payables.
1. Days of Inventory on Hand (DOH):
- The DOH ratio has seen fluctuations over the past five years, ranging from 144.25 days to 202.89 days.
- A higher number of days indicates that Avanos Medical holds its inventory for a longer period before selling it.
- The increase in DOH from 2022 to 2023 suggests a potential inefficiency in managing inventory levels.
- Avanos may need to assess its inventory management practices to avoid potential obsolescence and improve cash flow.
2. Days of Sales Outstanding (DSO):
- The DSO ratio reflects how long it takes for Avanos to collect payments from customers after sales.
- The DSO has ranged from 64.31 days to 85.74 days over the past five years.
- A lower DSO is desirable as it indicates quicker collection of receivables.
- The decrease in DSO from 2022 to 2023 indicates an improvement in the collection process, enhancing liquidity and cash flow.
3. Number of Days of Payables:
- The days of payables metric reveals how long Avanos takes to settle its outstanding payables to suppliers.
- The number of days ranged from 54.13 days to 102.56 days over the past five years.
- A longer period of payables indicates that Avanos may be effectively using trade credit to manage cash flow.
- The decrease in days of payables from 2022 to 2023 implies that the company is paying its obligations to suppliers more quickly, potentially impacting working capital management.
Overall, Avanos Medical Inc may benefit from optimizing its inventory levels, maintaining efficient collections from customers, and strategically managing payables to enhance operational efficiency and cash flow.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.01 | 6.83 | 4.41 | 3.99 | 3.70 |
| Total asset turnover | 0.35 | 0.45 | 0.46 | 0.42 | 0.38 |
The long-term activity ratios of Avanos Medical Inc show a positive trend over the past five years. The fixed asset turnover ratio, which measures the efficiency of utilizing fixed assets to generate sales, has been consistently increasing, from 3.78 in 2019 to 5.74 in 2023. This indicates that the company is generating more revenue from its fixed assets each year.
Similarly, the total asset turnover ratio, which evaluates the efficiency of using all assets to generate sales, has also shown improvement over the years, with an increase from 0.39 in 2019 to 0.40 in 2023. This suggests that the company has been able to generate more sales for each dollar of total assets employed.
Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios demonstrates that Avanos Medical Inc has been effectively managing and utilizing its assets to drive sales growth and improve operational efficiency over the long term.