Chemed Corp (CHE)

Short-term

Turnover ratios

Chemed Corp.'s activity ratios provide insights into the efficiency of its operations in managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover:
Chemed Corp.'s inventory turnover has shown a decreasing trend over the past five years, indicating that the company is selling its inventory at a slower rate. This may suggest potential issues with inventory management or changing demand patterns for its products. However, the high turnover values suggest that the company is effectively managing its inventory in recent years.

2. Receivables Turnover:
The receivables turnover ratio reflects how quickly Chemed Corp. collects payments from its customers. The decreasing trend in receivables turnover could imply that the company is taking longer to collect payments from customers, which may impact its cash flow and working capital management.

3. Payables Turnover:
The payables turnover ratio indicates how efficiently Chemed Corp. is managing its payments to suppliers. The fluctuating values suggest variations in the company's payment terms or relationships with suppliers. A higher turnover ratio may indicate that the company is paying its suppliers more quickly, potentially impacting cash flow and liquidity.

4. Working Capital Turnover:
The working capital turnover ratio, which is not available for all years, measures how efficiently Chemed Corp. is generating revenue relative to its working capital. The significant decline in 2020 compared to the previous available year may indicate changes in the company's working capital management practices or business operations.

Overall, a detailed analysis of Chemed Corp.'s activity ratios suggests areas where management may need to focus on improving efficiency and optimizing working capital to enhance overall financial performance.

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Average number of days

Chemed Corp.'s activity ratios can provide insights into the efficiency of its operations and management of its working capital.

1. Days of Inventory on Hand (DOH): This ratio indicates the average number of days it takes for Chemed Corp. to sell its inventory. The increasing trend from 2019 to 2023 suggests that the company is holding onto its inventory for a longer period, potentially tying up cash and increasing carrying costs. However, the ratio is relatively low, indicating that the company is efficiently managing its inventory compared to previous years.

2. Days of Sales Outstanding (DSO): DSO measures the average number of days it takes for Chemed Corp. to collect its accounts receivable. The increasing trend from 2019 to 2023 may suggest that the company is facing challenges in collecting payments from customers promptly. A high DSO can indicate potential liquidity issues or inefficiencies in credit and collection processes.

3. Number of Days of Payables: This ratio represents the average number of days it takes for Chemed Corp. to pay its suppliers. The variability in this ratio over the years could indicate changes in the company's payment terms or relationships with suppliers. A longer payment period can help improve cash flow but may also strain relationships with suppliers if not managed effectively.

Overall, Chemed Corp. should carefully monitor these activity ratios to ensure efficient management of working capital, optimize cash flow, and maintain healthy relationships with both customers and suppliers.

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Long-term

The fixed asset turnover ratio measures how efficiently Chemed Corp. generates revenue from its investment in fixed assets. The trend in Chemed Corp.'s fixed asset turnover ratio has been relatively stable over the past five years, ranging between 10.69 and 11.11. This indicates that the company has been consistently able to generate revenue from its fixed assets.

On the other hand, the total asset turnover ratio reflects how effectively Chemed Corp. utilizes all its assets to generate sales. The trend in the total asset turnover ratio shows some fluctuation, decreasing from 1.53 in 2019 to 1.36 in 2023, with variations in between. This suggests that the company's ability to generate sales from its total assets has decreased over the years.

Overall, while Chemed Corp. has maintained a relatively stable performance in terms of generating revenue from its fixed assets, there has been a decline in the efficiency of utilizing its total assets to generate sales. Management may need to investigate the reasons behind this trend and consider strategies to improve the utilization of total assets to boost revenue generation.