EPAM Systems Inc (EPAM)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its assets and liabilities to generate sales and cash flow. Let's analyze the activity ratios of EPAM Systems Inc:

1. Receivables Turnover:
EPAM Systems Inc's receivables turnover ratio has been relatively stable over the past eight quarters, ranging between 4.60 and 5.27. This indicates that the company collects its accounts receivable roughly every 4.60 to 5.27 times per year. A higher receivables turnover ratio suggests that the company efficiently collects payment from customers, which is generally positive for cash flow and liquidity.

2. Payables Turnover:
EPAM Systems Inc's payables turnover ratio has fluctuated over the quarters, with values ranging from 101.79 to 141.46. A high payables turnover ratio indicates that the company is efficiently managing its accounts payable by quickly paying off its suppliers. This may indicate good relationships with suppliers and potential cost savings through discounts for early payment.

3. Working Capital Turnover:
EPAM Systems Inc's working capital turnover ratio has also displayed variability, ranging from 1.92 to 2.66. This ratio measures how effectively the company is using its working capital to generate sales. A higher working capital turnover ratio suggests that the company efficiently utilizes its current assets (e.g., cash, inventory, receivables) to generate revenue. A declining trend in this ratio might indicate inefficiencies in asset utilization.

Overall, EPAM Systems Inc's activity ratios show a mixed picture of efficiency in managing its assets and liabilities. While the receivables turnover and payables turnover ratios demonstrate some consistency and efficiency, the working capital turnover ratio fluctuates, indicating potential areas for improvement in asset utilization efficiency.

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Average number of days

EPAM Systems Inc's activity ratios reflect the efficiency of its operations in managing inventory, collecting receivables, and paying its suppliers.

Days of Sales Outstanding (DSO) measures the average number of days it takes for the company to collect payments from its customers. The trend in DSO has been relatively stable over the past eight quarters, ranging from 69.20 days to 79.29 days. Higher DSO values indicate a longer collection period, which may impact cash flow.

Days of Inventory on Hand (DOH) was not provided in the data. DOH measures how quickly a company is able to turn its inventory into sales. A lower DOH value implies that the company is efficient in managing its inventory levels and converting it into revenue.

Number of Days of Payables measures the average number of days it takes for the company to pay its suppliers. The trend in payables days has been relatively stable, ranging from 2.58 days to 3.59 days. A higher number of days of payables could indicate that the company is holding onto cash longer before paying its vendors.

Overall, maintaining a balance between DSO, DOH, and payables days is crucial for EPAM Systems Inc to optimize its working capital management and improve its overall operational efficiency.

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Long-term

EPAM Systems Inc's long-term activity ratios provide insight into the company's efficiency in utilizing its fixed assets and total assets to generate revenue. The fixed asset turnover ratio measures how efficiently the company generates sales from its fixed assets. Over the period from Q1 2022 to Q4 2023, EPAM's fixed asset turnover ratio has shown a fluctuating trend, varying between 17.65 and 22.42. A higher fixed asset turnover ratio indicates that the company is effectively utilizing its fixed assets to generate revenue.

On the other hand, the total asset turnover ratio assesses the company's ability to generate sales from all its assets, both fixed and current. EPAM's total asset turnover ratio has also exhibited variability during the same period, ranging from 1.08 to 1.26. A total asset turnover ratio above 1 indicates that the company is generating more revenue relative to its total assets.

When comparing the fixed asset turnover ratio to the total asset turnover ratio, it is evident that EPAM Systems Inc is more efficient in generating revenue from its fixed assets than from its total assets. The trend in both ratios suggests that the company has maintained a relatively stable level of efficiency in asset utilization over the analyzed period. However, continued monitoring of these ratios will be essential to assess EPAM's ongoing performance in effectively utilizing its assets for revenue generation.