Deluxe Corporation (DLX)

Short-term

Turnover ratios

Deluxe Corp.'s activity ratios provide insights into how efficiently the company manages its inventory, receivables, payables, and working capital.

The inventory turnover ratio has shown a fluctuating trend over the past five years, ranging from 18.21 to 25.32 times. The significant increase from 2020 to 2021 and then a slight decrease in 2022 suggest that the company has been managing its inventory more efficiently. A higher inventory turnover ratio indicates that Deluxe Corp. is selling its inventory more quickly, which is generally favorable.

In terms of receivables turnover, the company has maintained relatively stable performance, with ratios ranging from 8.86 to 10.24 times. A higher receivables turnover ratio indicates that Deluxe Corp. is collecting its receivables more efficiently and effectively converting sales into cash.

The payables turnover ratio has exhibited a similar stable trend over the years, with values ranging from 5.78 to 7.25 times. A higher payables turnover ratio suggests that the company is paying its suppliers more frequently, which can help in managing cash flows and maintaining good relationships with suppliers.

The working capital turnover ratio was not available for the earlier years, but in 2020 and 2019, the ratios were quite high at 18.89 and 31.26 times, respectively. This indicates that Deluxe Corp. is efficiently utilizing its working capital to generate revenue.

Overall, the analysis of Deluxe Corp.'s activity ratios suggests that the company is effectively managing its inventory, receivables, payables, and working capital to drive efficiency and optimize its financial performance.

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Average number of days

Deluxe Corp.'s activity ratios provide insights into how efficiently the company manages its inventory, accounts receivable, and accounts payable.

- Days of inventory on hand (DOH) measures how long, on average, inventory sits in the company's warehouse before being sold. Deluxe Corp. has shown improvement in managing its inventory over the years, with DOH decreasing from 20.04 days in 2020 to 14.92 days in 2023. This indicates that the company is selling its inventory more quickly, which can help reduce carrying costs and improve cash flow.

- Days of sales outstanding (DSO) represents the average number of days it takes for the company to collect payments from its customers. Deluxe Corp. has also shown improvements in this area, with DSO decreasing from 41.21 days in 2021 to 36.15 days in 2023. A lower DSO suggests that the company is collecting receivables more efficiently, which can improve liquidity and reduce the risk of bad debts.

- Number of days of payables reflects how long the company takes to pay its suppliers. A higher number of days of payables indicates that the company is taking longer to settle its payables, which can be beneficial in managing cash flow. Deluxe Corp. has had varying trends in its payables management, with days of payables fluctuating between 50.38 days in 2019 to 63.18 days in 2021. In 2023, days of payables decreased to 54.90 days, indicating a potential improvement in the company's payment practices.

Overall, based on these activity ratios, Deluxe Corp. has made strides in optimizing its inventory turnover, accounts receivable collection, and accounts payable management, which could contribute to enhanced efficiency and financial performance.

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Long-term

The long-term activity ratios of Deluxe Corp. indicate the efficiency with which the company is utilizing its assets to generate revenue over a period of five years.

1. Fixed asset turnover:
- The fixed asset turnover ratio for Deluxe Corp. has been consistently high over the past five years, ranging from 16.05 to 20.82. This indicates that the company is efficiently using its fixed assets to generate sales.
- A higher fixed asset turnover ratio suggests that Deluxe Corp. is effectively leveraging its long-term investments in fixed assets to drive sales, which may lead to improved profitability and operational efficiency.

2. Total asset turnover:
- In contrast, the total asset turnover ratio for Deluxe Corp. has shown a declining trend over the same period, decreasing from 1.03 in 2019 to 0.71 in 2023. This indicates that the company is generating less revenue relative to its total assets.
- A lower total asset turnover ratio may suggest that Deluxe Corp. could be underutilizing its total asset base, which could potentially lead to inefficiencies in asset management and reduced profitability.

In conclusion, while Deluxe Corp. has been effectively utilizing its fixed assets to drive sales, the declining trend in total asset turnover raises concerns about the company's overall asset efficiency and effectiveness in generating revenue. Further analysis of the factors influencing these ratios may provide insights into areas where the company can improve its long-term asset utilization and operational performance.