Quest Diagnostics Incorporated (DGX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 32.63 | 33.59 | 31.63 | 26.03 | 40.95 |
| Receivables turnover | 7.52 | 8.15 | 7.39 | 6.21 | 7.27 |
| Payables turnover | 16.40 | 19.91 | 18.43 | 13.01 | 19.15 |
| Working capital turnover | 16.34 | 28.08 | 10.76 | 7.36 | 15.45 |
Quest Diagnostics, Inc.'s activity ratios provide insights into the efficiency of the company's operations in managing its assets and liabilities.
1. Inventory Turnover:
- The inventory turnover ratio has shown a consistent trend of efficiently managing inventory over the last five years, with a peak in 2019 followed by a slight decrease. This indicates that Quest Diagnostics has been able to sell and replace its inventory multiple times during each year.
2. Receivables Turnover:
- The receivables turnover ratio has been relatively stable over the years, suggesting that Quest Diagnostics efficiently collects payments from its customers. The decrease in 2023 compared to 2022 could indicate a longer collection period or changes in sales practices.
3. Payables Turnover:
- The payables turnover ratio has shown a fluctuating trend, but overall, it indicates that Quest Diagnostics manages its payables effectively. The increase in 2023 compared to 2022 suggests a shorter payment period to suppliers, which could impact cash flows positively.
4. Working Capital Turnover:
- The working capital turnover ratio reflects how efficiently Quest Diagnostics utilizes its working capital to generate revenue. The ratios have varied significantly over the years, with a notable increase in 2022. This could be due to changes in operating cycles or sales strategies.
Overall, the activity ratios of Quest Diagnostics, Inc. demonstrate a generally efficient management of assets and liabilities, which is crucial for maintaining liquidity and profitability in the healthcare services industry. Further analysis and comparison with industry benchmarks could provide additional insights into the company's operational efficiency.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 11.19 | 10.87 | 11.54 | 14.02 | 8.91 |
| Days of sales outstanding (DSO) | days | 48.53 | 44.76 | 49.39 | 58.79 | 50.22 |
| Number of days of payables | days | 22.26 | 18.33 | 19.81 | 28.05 | 19.06 |
To analyze the activity ratios of Quest Diagnostics, Inc., we will focus on Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables. These ratios provide insights into how efficiently the company manages its inventory, collects its receivables, and pays its suppliers.
1. Days of Inventory on Hand (DOH):
- The trend in DOH shows a fluctuating pattern over the past five years. The company held inventory for an average of 11.19 days in 2023, which is slightly higher compared to the previous year.
- A lower DOH indicates better inventory management efficiency. Therefore, Quest Diagnostics, Inc. was able to reduce its inventory holding period in 2019. However, there was an increase in 2020 and 2021, indicating potential inventory management challenges during those years.
2. Days of Sales Outstanding (DSO):
- The DSO ratio demonstrates the average collection period for accounts receivable. Quest Diagnostics, Inc. collected its receivables in approximately 47.74 days in 2023, compared to 44.13 days in 2022.
- A higher DSO implies slower collections, which can impact cash flow and liquidity. The company experienced increased collection periods in 2020 and 2021, which might have put pressure on its working capital.
3. Number of Days of Payables:
- Days of payables refer to the average time it takes for the company to pay its suppliers. Quest Diagnostics, Inc. had a payables period of 22.26 days in 2023, up from 18.33 days in 2022.
- A higher number of days of payables may indicate a more extended credit period with suppliers, which can positively impact cash flow. The company's payables period increased in 2020 but decreased in 2021 and 2023.
Overall, analyzing these activity ratios suggests that Quest Diagnostics, Inc. should focus on optimizing its inventory management, enhancing its accounts receivable collection process, and carefully managing its payables to improve operational efficiency and working capital management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.01 | 5.52 | 6.23 | 5.80 | 5.32 |
| Total asset turnover | 0.65 | 0.76 | 0.78 | 0.67 | 0.60 |
Quest Diagnostics appears to have shown consistency in its fixed asset turnover ratio over the past five years, with the ratio gradually decreasing from 6.32 in 2021 to 5.09 in 2023. This indicates that the company generated $5.09 in revenue for every dollar invested in fixed assets in 2023. The decreasing trend suggests that Quest Diagnostics might be becoming less efficient in utilizing its fixed assets to generate sales.
On the other hand, the total asset turnover ratio has fluctuated over the same period, reaching its peak at 0.79 in 2021 before declining to 0.66 in 2023. This ratio indicates that for every dollar invested in total assets, the company generated $0.66 in revenue in 2023. The decreasing trend in total asset turnover suggests that Quest Diagnostics may be becoming less effective in utilizing all its assets to generate sales.
Overall, the long-term activity ratios of Quest Diagnostics indicate that the company may be facing challenges in efficiently utilizing both its fixed and total assets to generate revenue. Further analysis and investigation into the operational efficiency and asset management practices of the company are recommended to address these declining trends in asset turnover ratios.