Avnet Inc (AVT)

Short-term

Turnover ratios

The activity ratios of Avnet Inc over the last five years show the company's efficiency in managing key components of its operating cycle:

1. Inventory Turnover: The inventory turnover ratio reflects how many times Avnet Inc sells and replaces its inventory during a given period. The decreasing trend in inventory turnover from 5.70 in 2020 to 3.84 in 2024 suggests that the company is holding onto its inventory for a longer period. This may indicate either slower sales, overstocking, or inefficiencies in inventory management.

2. Receivables Turnover: The receivables turnover ratio indicates how efficiently Avnet Inc collects its accounts receivable. The slight fluctuations in this ratio over the years (ranging from 4.86 to 5.65) show a relatively stable performance in collecting payments from customers within the industry average range.

3. Payables Turnover: The payables turnover ratio measures how quickly the company pays its suppliers. Avnet Inc's payables turnover has fluctuated between 6.22 and 8.88 over the past five years. A higher turnover ratio suggests that the company is paying its suppliers more quickly, which could indicate a strong bargaining power or effective management of payables.

4. Working Capital Turnover: The working capital turnover ratio evaluates how efficiently Avnet Inc is utilizing its working capital to generate sales. The ratio has varied between 4.02 and 5.26, indicating that the company is effectively utilizing its working capital to support its operations and generate revenue.

Overall, while Avnet Inc shows some areas of efficiency in managing its operating cycle, such as in receivables turnover and working capital turnover, the decreasing trend in inventory turnover may require further investigation to address any potential inefficiencies in inventory management.

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Average number of days

Avnet Inc's activity ratios indicate the efficiency of its management in managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH): Avnet's DOH has been gradually increasing over the last five years, from 64.04 days in 2020 to 95.09 days in 2024. This suggests that the company is taking longer to sell its inventory, which may tie up capital and increase the risk of obsolescence. Avnet should closely monitor and control its inventory levels to improve efficiency.

2. Days of Sales Outstanding (DSO): Avnet's DSO has fluctuated over the years but has generally remained within a relatively stable range. In 2024, the DSO stood at 67.47 days compared to 75.18 days in 2020. This indicates that the company takes, on average, 67.47 days to collect its accounts receivable. Avnet should aim to reduce this metric to accelerate cash flows.

3. Number of Days of Payables: Avnet's days of payables have shown some variability over the years, ranging from 41.12 days in 2020 to 58.17 days in 2024. A higher number of days of payables indicates that the company is taking longer to pay its suppliers. While this can be beneficial for cash flow management, it could strain relationships with suppliers if extended too far. Avnet should strike a balance between maximizing its days of payables and maintaining good supplier relationships.

In summary, Avnet Inc should focus on optimizing its inventory management, streamlining its accounts receivable collection processes, and carefully managing its payables to enhance its overall operational efficiency and financial performance.

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Long-term

Based on the provided long-term activity ratios for Avnet Inc, we can observe the following trends:

1. Fixed Asset Turnover:
- Avnet's fixed asset turnover ratio has shown fluctuations over the past five years. The ratio decreased from 60.10 in 2023 to 41.81 in 2024, indicating a lower efficiency in generating sales revenue from fixed assets.
- However, despite the decrease in 2024, the ratio has generally been at relatively high levels over the period, with peaks in 2022 and 2023 (77.13 and 60.10, respectively).
- This ratio suggests that Avnet is effectively utilizing its fixed assets to generate sales revenue, although the recent decrease in 2024 may warrant further monitoring to ensure efficient asset utilization.

2. Total Asset Turnover:
- Avnet's total asset turnover ratio has also experienced fluctuations, albeit to a lesser extent compared to the fixed asset turnover ratio. The ratio decreased slightly from 2.13 in 2023 to 1.95 in 2024.
- Generally, the total asset turnover ratio has remained relatively stable over the past five years, hovering around 2.0, which indicates that Avnet is efficient in generating sales revenue relative to its total asset base.
- While the decrease in 2024 could be a cause for attention, the overall stability of the total asset turnover ratio suggests that Avnet has maintained a consistent level of efficiency in utilizing its total assets to drive sales.

In conclusion, the analysis of Avnet Inc's long-term activity ratios indicates that the company has demonstrated a historical ability to efficiently utilize both fixed and total assets to generate sales revenue. While there have been fluctuations in these ratios, particularly in 2024, the general trend suggests a reasonable level of operational efficiency in asset utilization. Monitoring these ratios over time can provide valuable insights into Avnet's long-term performance in terms of asset turnover.