American Water Works (AWK)

Short-term

Turnover ratios

Based on the provided data for American Water Works, let's analyze the activity ratios:

1. Inventory Turnover:
The inventory turnover ratio measures how efficiently a company manages its inventory. American Water Works had a consistently high inventory turnover ratio from March 2020 to December 2021, indicating that the company was efficiently managing its inventory. However, from March 2022 to December 2024, the ratio declined significantly, suggesting a potential issue with inventory management during this period.

2. Receivables Turnover:
The receivables turnover ratio evaluates how well a company is collecting payments from its customers. American Water Works had a fluctuating receivables turnover ratio throughout the period, indicating potential variability in the company's collection efficiency. The ratio peaked in December 2021 but declined thereafter, which could indicate challenges in collecting payments efficiently.

3. Payables Turnover:
The payables turnover ratio assesses how quickly a company pays its suppliers. American Water Works had a relatively stable payables turnover ratio from March 2020 to June 2021. However, from September 2022 onwards, the ratio decreased significantly, indicating a slowdown in the company's payment to suppliers. This could potentially impact relationships with suppliers.

4. Working Capital Turnover:
The working capital turnover ratio shows how efficiently a company utilizes its working capital to generate sales. American Water Works had no data for this ratio until June 2023, where it showed a significant ratio of 17.91. This could indicate an improvement in the company's ability to generate sales from its working capital. However, data is missing for subsequent periods, making it difficult to draw further conclusions.

In conclusion, while American Water Works showed strong activity ratios in some periods, there were fluctuations and declines in efficiency in others. This analysis suggests potential areas for the company to focus on improving its inventory management, receivables collection, payables handling, and working capital utilization in order to enhance overall operational efficiency.

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Average number of days

Based on the provided data, the analysis of American Water Works' activity ratios reveals fluctuations in its efficiency in managing inventory, collecting receivables, and paying payables over time.

1. Days of Inventory on Hand (DOH):
- American Water Works showed a consistent improvement in managing its inventory from March 31, 2020, to June 30, 2021, with days ranging from around 13 to 15 days.
- However, there was a sudden spike in the DOH ratio from March 31, 2022, to December 31, 2024, reaching a peak of 1,012.88 days on September 30, 2023, before dropping back to 606.37 days on December 31, 2024.
- This indicates potential challenges in inventory management and supply chain efficiency during this period.

2. Days of Sales Outstanding (DSO):
- The DSO ratio reflects American Water Works' ability to collect outstanding receivables. The company maintained relatively stable DSO figures from March 31, 2020, to December 31, 2021, ranging between 40 to 55 days.
- However, there was an increase in DSO from March 31, 2022, to December 31, 2024, peaking at 69.72 days on December 31, 2022, before dropping to 59.35 days on December 31, 2024.
- The increasing DSO may indicate potential issues in the company's credit policies or the efficiency of its collections process during this period.

3. Number of Days of Payables:
- The days of payables ratio shows the average number of days it takes for American Water Works to pay its suppliers.
- The company experienced significant fluctuations in its payables management, with periods of improvement and deterioration.
- The number of days of payables increased gradually from March 31, 2020, to June 30, 2022, reaching a peak of 2,261.22 days on December 31, 2022, before declining to 2,036.94 days on December 31, 2024.
- Such high payables days may indicate the company's ability to extend payment terms with suppliers but could also signal potential cash flow challenges or strained supplier relationships.

In summary, American Water Works' activity ratios suggest varying levels of efficiency in managing inventory, receivables, and payables over the analyzed periods. The company experienced fluctuations and significant spikes in these ratios, highlighting potential challenges in working capital management and operational efficiency during certain periods.

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Long-term

The fixed asset turnover ratio for American Water Works has shown some fluctuation over the years, ranging from 0.16 to 0.22. This ratio measures how effectively the company is utilizing its fixed assets to generate revenue. The general trend indicates a slight increase from 2020 to 2021, peaking in December 2021, followed by a decrease towards the end of 2022 and into 2024.

On the other hand, the total asset turnover ratio has remained relatively stable, hovering around 0.14 to 0.18 throughout the period under review. This ratio provides insight into how efficiently the company is using its total assets to generate sales. Despite some minor fluctuations, there is no significant upward or downward trend observed over the years.

Overall, the fixed asset turnover ratio shows more variability compared to the total asset turnover ratio for American Water Works. It is essential for the company to carefully manage its fixed assets to ensure optimal utilization and improve its operational efficiency in the long term.