Avery Dennison Corp (AVY)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 8.22 | 7.98 | 8.16 | 8.55 | 10.11 |
| Receivables turnover | 5.83 | 6.52 | 5.86 | 5.59 | 5.76 |
| Payables turnover | 5.92 | 6.01 | 5.70 | 5.83 | 6.29 |
| Working capital turnover | 85.44 | — | 44.69 | 14.08 | 80.47 |
Avery Dennison Corp's activity ratios indicate the efficiency of its operations in managing inventory, receivables, payables, and working capital.
1. Inventory turnover: Avery Dennison Corp's inventory turnover has been consistently high over the past five years, ranging from 7.98 to 10.11 times. This suggests that the company is able to sell and replace its inventory relatively quickly, which is a positive sign of efficient inventory management.
2. Receivables turnover: The receivables turnover ratio measures how effectively the company collects payments from customers. Avery Dennison Corp's receivables turnover has fluctuated over the years but has generally remained within a reasonable range, indicating that the company is efficient in collecting payments from its customers.
3. Payables turnover: The payables turnover ratio reflects how quickly the company is paying its suppliers. Avery Dennison Corp's payables turnover has been steady over the years, indicating a consistent payment cycle with suppliers.
4. Working capital turnover: The working capital turnover ratio measures how efficiently the company is using its working capital to generate sales. Avery Dennison Corp's working capital turnover has varied significantly, with a notable increase in 2023 compared to the previous years. This suggests that the company has been able to generate higher sales relative to its working capital in 2023.
Overall, based on the activity ratios, Avery Dennison Corp appears to have efficient operations in managing its inventory, receivables, payables, and working capital, which is essential for maintaining sustainable business growth and profitability.
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 | 44.42 | 45.76 | 44.72 | 42.71 | 36.10 |
| Days of sales outstanding (DSO) | days | 62.63 | 56.02 | 62.31 | 65.33 | 63.35 |
| Number of days of payables | days | 61.61 | 60.69 | 64.03 | 62.58 | 58.04 |
To analyze the activity ratios of Avery Dennison Corp, we will focus on the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables for the years 2019 to 2023.
Days of Inventory on Hand (DOH) measures how many days, on average, the company holds its inventory before selling it. A lower DOH is generally more favorable as it indicates efficient inventory management. Avery Dennison's DOH has been increasing over the years, from 36.10 days in 2019 to 44.42 days in 2023. This trend suggests that the company may be carrying more inventory relative to its sales, which could tie up capital.
Days of Sales Outstanding (DSO) reflects the average number of days it takes for the company to collect its accounts receivable. A lower DSO indicates faster collections and better liquidity. Avery Dennison's DSO fluctuated between 56.02 days in 2019 and 62.63 days in 2023. The increasing DSO suggests that the company is taking longer to collect payments from customers, potentially impacting its cash flow and working capital.
The Number of Days of Payables represents the average number of days it takes for the company to pay its suppliers. A higher number of days indicates that the company is taking longer to settle its payables, which can improve cash flow. Avery Dennison's payables days have ranged from 58.04 days in 2019 to 61.61 days in 2023. This indicates that the company is extending its payment terms over the years, which could have strategic implications for managing cash flow and relationships with suppliers.
Overall, the trends in Avery Dennison Corp's activity ratios show a mixed picture. While the Days of Inventory on Hand have increased, potentially signaling excess inventory, the Days of Sales Outstanding have also risen, indicating slower collections. However, the increase in the Number of Days of Payables suggests a strategic approach to managing cash flow. Further analysis and context would be needed to assess the company's overall operational efficiency and working capital management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.17 | 5.81 | 5.65 | 5.14 | 5.77 |
| Total asset turnover | 1.00 | 1.13 | 1.05 | 1.13 | 1.27 |
Avery Dennison Corp's long-term activity ratios provide insights into its efficiency in utilizing fixed assets and total assets to generate revenue.
The fixed asset turnover ratio has been relatively stable over the past five years, with a slight decrease in 2023 compared to 2022. This ratio indicates that for every dollar invested in fixed assets, Avery Dennison Corp generates $5.17 of revenue in 2023. Even though there has been a slight decline, the company continues to effectively leverage its fixed assets to generate revenue.
On the other hand, the total asset turnover ratio has shown some fluctuation over the years, with a notable decline in 2021. This ratio reflects the company's ability to generate revenue from all its assets. In 2023, Avery Dennison Corp generated $1.00 of revenue for every dollar of total assets. The decreasing trend in total asset turnover may indicate inefficiencies in asset utilization or changes in the business structure.
Overall, Avery Dennison Corp's long-term activity ratios suggest that the company is efficiently utilizing its fixed assets to generate revenue, although there may be room for improvement in optimizing the utilization of its total assets. It is essential for the company to continually monitor and enhance its asset management strategies to maintain profitability and competitiveness in the market.