PC Connection Inc (CNXN)

Short-term

Turnover ratios

PC Connection Inc's activity ratios provide insights into how effectively the company is managing its assets and liabilities to generate sales.

1. Inventory Turnover:
PC Connection Inc's inventory turnover has shown a fluctuating trend over the past five years, with a significant increase in 2023 compared to 2022 and 2021. An inventory turnover ratio of 22.21 in 2023 indicates that the company is selling its inventory more frequently compared to the previous years. This may indicate efficient inventory management and faster inventory turnover.

2. Receivables Turnover:
The receivables turnover ratio of PC Connection Inc has been relatively stable over the years, indicating consistency in collecting outstanding receivables. A ratio of 4.29 in 2023 suggests that the company collects its accounts receivable approximately 4.29 times during the year. A consistent and relatively high receivables turnover ratio indicates effective credit and collection policies.

3. Payables Turnover:
The payables turnover ratio of PC Connection Inc has shown some fluctuations over the years, with a decrease in 2023 compared to the previous years. A payables turnover ratio of 10.46 in 2023 indicates that the company pays its trade payables approximately 10.46 times during the year. A higher payables turnover ratio may suggest that the company is managing its payables efficiently and possibly taking advantage of trade credit terms.

4. Working Capital Turnover:
PC Connection Inc's working capital turnover has been on a decreasing trend over the past five years. A ratio of 3.95 in 2023 indicates that the company generates sales approximately 3.95 times for every dollar of working capital invested. A decreasing working capital turnover ratio may suggest that the company is becoming less efficient in generating sales from its working capital.

Overall, the analysis of PC Connection Inc's activity ratios indicates various aspects of the company's operational efficiency, including inventory management, accounts receivable collection, payables management, and utilization of working capital. Further trend analysis and comparison with industry benchmarks would provide a more comprehensive understanding of the company's performance.

---

Average number of days

To analyze PC Connection Inc's activity ratios, we will focus on the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- The DOH measures how many days, on average, a company holds inventory before selling it.
- PC Connection Inc's DOH has fluctuated over the past five years, ranging from a low of 16.44 days in 2023 to a high of 26.85 days in 2021.
- A lower DOH indicates that the company is selling inventory more quickly, which can be a positive sign of efficiency. The decrease in DOH from 2021 to 2023 suggests improved inventory management.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes the company to collect cash from credit sales.
- PC Connection Inc's DSO has also varied over the years, with the highest DSO of 95.49 days in 2020 and the lowest of 78.00 days in 2022.
- A lower DSO indicates quicker collection of accounts receivable, which can improve cash flow and liquidity. The reduction in DSO from 2020 to 2022 suggests enhanced efficiency in collecting payments.

3. Number of Days of Payables:
- This ratio shows how long a company takes to pay its suppliers.
- PC Connection Inc's days of payables have fluctuated, with the highest number of days at 38.48 in 2020 and the lowest at 28.15 in 2022.
- An increase in the number of days of payables can indicate that the company is taking longer to pay its bills, possibly to preserve cash flow. The decrease in payables from 2020 to 2022 could imply improved relationships with suppliers or changes in payment terms.

In summary, a decreasing trend in Days of Inventory on Hand and Days of Sales Outstanding, along with fluctuations in the Number of Days of Payables, suggest that PC Connection Inc has been enhancing its efficiency in managing inventory, collecting receivables, and handling payables over the years. These improvements can contribute to better cash flow management and operational performance.

---

Long-term

The long-term activity ratios of PC Connection Inc indicate how efficiently the company is utilizing its assets over a period of five years.

Fixed asset turnover shows a consistent trend of fluctuation, starting at 43.90 in 2019, peaking in 2022 at 52.81, and then decreasing to 50.30 in 2023. This ratio measures the company's ability to generate sales revenue from its investment in fixed assets such as property, plant, and equipment. The higher the ratio, the more efficiently the company is utilizing its fixed assets to generate sales.

On the other hand, the total asset turnover ratio displays a similar pattern of variation but on a generally declining trend over the five-year period. It begins at 3.01 in 2019, showing a high level of efficiency in generating sales from total assets, but declines to 2.40 by the end of 2023. This ratio assesses how effectively the company is using all its assets, including both fixed and current assets, to generate revenue.

Overall, these ratios suggest that while PC Connection Inc has been relatively efficient in generating sales from both fixed and total assets, there has been a slight decline in efficiency over time, especially in terms of total asset turnover. This trend may indicate the need for the company to further optimize its asset utilization strategies in the long term.