Flex Ltd (FLEX)

Short-term

Turnover ratios

Flex Ltd's activity ratios provide insight into how efficiently the company manages its assets and liabilities to generate sales.

1. Inventory turnover:
- The inventory turnover ratio has been relatively stable over the past five years, ranging from 3.82 to 6.34.
- This ratio indicates that Flex Ltd sells and replenishes its inventory approximately 4 to 6 times a year.
- A higher ratio suggests faster inventory turnover and better inventory management efficiency.

2. Receivables turnover:
- Flex Ltd's receivables turnover has shown an increasing trend from 5.84 to 9.94 over the past five years.
- This indicates that the company is collecting its accounts receivable more quickly each year, on average 8 to 10 times per year.
- A higher ratio is positive as it indicates efficient collection of sales on credit.

3. Payables turnover:
- The payables turnover ratio has also been increasing gradually from 4.02 to 5.74 over the same period.
- This suggests that Flex Ltd is taking less time to pay its suppliers on average, approximately 4 to 6 times a year.
- A higher payables turnover ratio may indicate better negotiation terms with suppliers or efficient working capital management.

4. Working capital turnover:
- Flex Ltd's working capital turnover has shown a decreasing trend from 12.91 to 5.88 over the past five years.
- This ratio indicates how effectively the company uses its working capital to generate revenue, with a higher ratio suggesting better utilization of resources.
- The declining trend may indicate a change in the company's working capital management strategy or investment priorities.

In summary, Flex Ltd has generally shown improvements in its receivables turnover and payables turnover ratios, suggesting better management of receivables and payables. Despite a decline in working capital turnover, the company's overall activity ratios indicate a satisfactory level of efficiency in managing its assets and liabilities to drive sales. Monitoring these ratios over time can help assess the company's operational performance and financial health.

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Average number of days

Days of inventory on hand (DOH) for Flex Ltd have been fluctuating over the past five years, with the trend showing an increase from 57.56 days in 2020 to 95.52 days in 2022, before declining to 88.24 days in 2024. This indicates that the company has been holding inventory for a longer period in recent years, which could tie up working capital and impact liquidity.

Days of sales outstanding (DSO) have also shown some variability, with a significant increase from 36.72 days in 2020 to 62.46 days in 2021, before declining to 42.28 days in 2024. This suggests that Flex Ltd has been taking longer to collect its receivables in some years, which may affect cash flow and working capital management.

In terms of the number of days of payables, Flex Ltd has managed to reduce this figure from 77.67 days in 2020 to 63.54 days in 2024. This indicates that the company has been taking longer to pay its suppliers in recent years, potentially improving cash flow by extending payment terms.

Overall, Flex Ltd's activity ratios show mixed performance over the past five years, with fluctuations in inventory management, accounts receivable collection, and accounts payable practices. Monitoring these ratios can help assess the company's efficiency in managing its working capital and overall operational effectiveness.

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Long-term

The long-term activity ratios for Flex Ltd, specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in utilizing its assets to generate sales revenue over the years.

1. Fixed Asset Turnover:
- Flex Ltd's fixed asset turnover has shown a gradually decreasing trend from 10.93 in 2020 to 11.54 in 2024. This indicates that the company's ability to generate sales from its fixed assets has slightly improved over the years.
- A higher fixed asset turnover ratio suggests that Flex Ltd is effectively utilizing its fixed assets to generate revenue, indicating efficient asset management and potentially lower asset underutilization.
- Despite the fluctuations, the general increasing trend of the fixed asset turnover ratio suggests that Flex Ltd has been able to optimize the utilization of its fixed assets to drive sales growth, which is a positive indicator for long-term operational efficiency.

2. Total Asset Turnover:
- The total asset turnover ratio for Flex Ltd fluctuated over the years, with a peak of 1.77 in 2020 and a decline to 1.43 in 2024. This fluctuation may indicate varying levels of asset utilization efficiency.
- A higher total asset turnover ratio indicates that Flex Ltd generates higher sales relative to its total assets, reflecting effective asset utilization and potentially indicating strong operational performance.
- The decreasing trend in the total asset turnover ratio from 2020 to 2024 may suggest a decrease in the efficiency of generating sales revenue from the total assets over the period. This could be due to changes in the company's operations or asset base composition.

In conclusion, while the fixed asset turnover ratio for Flex Ltd has shown a general increasing trend over the years, indicating improved efficiency in utilizing fixed assets for sales generation, the total asset turnover ratio has fluctuated, potentially signaling varying levels of overall asset utilization efficiency. It is essential for Flex Ltd to continually monitor and optimize its asset utilization to drive sustainable growth and profitability.