Central Garden & Pet Company A (CENTA)

Short-term

Turnover ratios

Central Garden & Pet Co.'s activity ratios provide insights into the efficiency of the company's operations and how effectively it manages its assets and liabilities. The inventory turnover ratio measures how well the company manages its inventory. Over the five-year period, the inventory turnover ratio has fluctuated, with a decrease from 4.32 in 2020 to 2.82 in 2023. This indicates that the company is taking longer to sell its inventory in 2023 compared to previous years, which may suggest inventory management issues.

The receivables turnover ratio reflects how efficiently the company collects on credit sales. Central Garden & Pet Co.'s receivables turnover ratio has shown a generally increasing trend, from 6.88 in 2020 to 9.94 in 2023. This suggests that the company has been improving its ability to collect receivables over the years, reflecting positively on its credit management practices.

The payables turnover ratio measures how quickly the company pays its suppliers. The company's payables turnover has been gradually increasing, from 9.25 in 2020 to 12.38 in 2023. This indicates that Central Garden & Pet Co. is paying its suppliers at a faster rate, which may be a reflection of improved cash management or negotiation power with suppliers.

The working capital turnover ratio assesses the efficiency of a company's working capital management. Central Garden & Pet Co.'s working capital turnover has varied over the years, showing a decrease from 3.23 in 2021 to 2.65 in 2023. This suggests that the company is generating less revenue for each unit of working capital, indicating a potential inefficiency in utilizing its working capital to generate sales.

In summary, while the company has shown improvements in its receivables turnover and payables turnover ratios, there are concerns regarding the declining inventory turnover and working capital turnover ratios. These ratios indicate potential issues with inventory management and the utilization of working capital, which may require further analysis and attention from management.

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Average number of days

Central Garden & Pet Co.'s activity ratios, including days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables, provide insights into the efficiency of the company's operations and its management of inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
The DOH ratio measures the average number of days inventory is held before being sold. Central Garden & Pet Co. saw an increase in its DOH from 2019 to 2022, indicating a higher number of days it took to sell its inventory. However, in 2023, the DOH decreased, suggesting an improvement in the management of inventory turnover. This improvement may be attributed to more effective inventory management practices or adjustments in the product mix to align with customer demand.

2. Days of Sales Outstanding (DSO):
The DSO ratio reflects the average number of days it takes to collect accounts receivable. Central Garden & Pet Co. experienced a decline in DSO from 2021 to 2023, indicating an improvement in the collection of receivables and a more efficient cash conversion cycle. The reduction in DSO suggests effective credit management, timely invoicing, and possibly stronger customer relationships.

3. Number of Days of Payables:
The number of days of payables measures how long it takes for the company to pay its suppliers. Central Garden & Pet Co. experienced fluctuations in this ratio, with a decreasing trend from 2019 to 2021, followed by an increase in 2022 and a decrease in 2023. The fluctuations indicate potential changes in the company's payment terms or relationships with suppliers.

Overall, the fluctuations observed in these activity ratios suggest that Central Garden & Pet Co. has been actively managing its working capital and operational efficiency over the years. The improvements in DSO and DOH, along with the fluctuations in the number of days of payables, demonstrate the company's responsiveness to optimizing its working capital management and operational processes.

It is important for the company to continue monitoring these activity ratios to ensure efficient utilization of its resources and sustained improvement in operational efficiency.

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Long-term

The long-term activity ratios provide insights into how effectively Central Garden & Pet Co. is utilizing its long-term assets to generate sales.

The fixed asset turnover ratio measures the efficiency of the company in generating sales from its investment in fixed assets. We observe a consistent and high fixed asset turnover over the years, with the ratio ranging from 8.41 to 11.02. This indicates that the company is efficiently utilizing its fixed assets to generate revenue. The decrease in fixed asset turnover from 2020 to 2023 could suggest a slowdown in sales generated from fixed assets, which may warrant further investigation.

The total asset turnover ratio reflects the company's ability to generate sales from all its assets. Central Garden & Pet Co. has experienced a declining trend in total asset turnover over the past five years, with the ratio decreasing from 1.18 in 2019 to 0.98 in 2023. This indicates a potential reduction in the overall efficiency of utilizing all assets to generate revenue. A lower total asset turnover could imply that the company is not effectively utilizing its total assets to generate sales, signaling inefficiencies in asset management or slower sales growth compared to the growth in assets.

In summary, while Central Garden & Pet Co. maintains a high fixed asset turnover, the decreasing trend in total asset turnover suggests a need for the company to reevaluate its overall asset management efficiency and sales generation strategies to ensure optimal utilization of its assets. Further analysis of the company's operations and sales growth may be necessary to better understand these trends and their implications for the company's long-term financial performance.