Central Garden & Pet Company (CENT)

Short-term

Turnover ratios

Central Garden & Pet Co.'s activity ratios reflect its efficiency in managing inventories, receivables, payables, and working capital over the past five years. The inventory turnover ratio indicates that, on average, the company is able to sell and restock its inventory approximately 2.82 times per year, showing a slight improvement from the prior year. This suggests effective inventory management, although there is room for further optimization.

The receivables turnover ratio has been steadily increasing over the years, reaching 9.94 in 2023, indicating that the company collects its receivables nearly 10 times a year. This signifies an efficient collection process and a potentially favorable credit policy.

The payables turnover ratio has also shown a consistent upward trend, reaching 12.38 in 2023. This indicates that the company is paying its suppliers at a faster rate, possibly negotiating favorable credit terms.

The working capital turnover ratio, while slightly declining from the previous year, still indicates that Central Garden & Pet Co. is effectively using its working capital to generate sales, with a turnover of 2.65 times in 2023.

In conclusion, the company has shown improving efficiency in managing its inventory, receivables, payables, and working capital, which is crucial for maintaining healthy cash flow and overall financial performance.

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Average number of days

To analyze Central Garden & Pet Co.'s activity ratios, we will focus on three key metrics: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

Days of Inventory on Hand (DOH):
The DOH measures the average number of days it takes for a company to sell its inventory. A higher DOH suggests that the company may be holding excess inventory, which could lead to increased storage costs and potential obsolescence. Central Garden & Pet Co.'s DOH has seen fluctuations over the past five years, with a notable increase from 84.50 days in 2020 to 145.92 days in 2022. However, the latest figure of 129.46 days indicates a decrease, which could be a positive sign of more efficient inventory management.

Days of Sales Outstanding (DSO):
The DSO metric reflects the average number of days it takes for a company to collect payment after a sale is made. A higher DSO can signal potential issues with accounts receivable management or customer creditworthiness. Central Garden & Pet Co.'s DSO has exhibited some volatility, with fluctuations observed over the past five years. The latest figure of 36.71 days in 2023 is an improvement from the previous year, suggesting that the company may be collecting payments more promptly.

Number of Days of Payables:
The number of days of payables measures how long a company takes to pay its suppliers. A higher number of days indicates that the company is taking longer to settle its payables, which could have implications for supplier relationships and potential cash flow management. Central Garden & Pet Co.'s number of days of payables has fluctuated over the years, with a slight decrease from 39.45 days in 2020 to 29.48 days in 2023. This indicates that the company may be managing its payables more efficiently in the latest period.

In summary, Central Garden & Pet Co.'s activity ratios suggest that the company has made improvements in managing inventory and collecting payments, while also demonstrating more efficient management of payables. These factors are essential for maintaining healthy working capital and sustaining operational effectiveness.

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Long-term

The long-term activity ratios of Central Garden & Pet Co. provide valuable insights into the company's efficiency in utilizing its fixed assets and total assets to generate sales.

The fixed asset turnover ratio has shown consistent high values over the past five years, indicating that the company is effectively using its fixed assets to generate sales. The slight fluctuations in this ratio suggest that the company has been able to maintain a relatively high level of efficiency in utilizing its fixed assets for revenue generation.

On the other hand, the total asset turnover ratio has shown a declining trend over the same period. This indicates that the company's overall efficiency in generating sales from its total assets has decreased. It's important to further investigate the reasons behind this decline and whether it is due to an increase in the company's total asset base without corresponding growth in sales.

Overall, the fixed asset turnover ratio reflects the company's strong operational efficiency in utilizing its fixed assets, while the decreasing trend in the total asset turnover ratio warrants attention and further analysis to understand its implications for the company's long-term asset utilization.