Federal Signal Corporation (FSS)

Short-term

Turnover ratios

Activity ratios provide insights into how effectively a company is managing its assets and liabilities to generate sales. Let's analyze the activity ratios of Federal Signal Corp. based on the provided data:

1. Inventory Turnover: Federal Signal Corp.'s inventory turnover has shown a fluctuating trend over the past five years, ranging from 3.72 to 4.91. A higher inventory turnover ratio indicates that the company is efficiently managing its inventory levels and quickly converting them into sales.

2. Receivables Turnover: The receivables turnover ratio measures how efficiently the company is collecting payments from its customers. Federal Signal Corp. has maintained a relatively stable receivables turnover ratio, ranging from 8.26 to 9.25 over the past five years. A higher ratio suggests that the company is promptly collecting outstanding receivables.

3. Payables Turnover: The payables turnover ratio indicates how quickly the company is paying its suppliers. Federal Signal Corp.'s payables turnover has shown an increasing trend, from 13.82 to 19.08 over the past five years. A higher payables turnover ratio suggests that the company is efficiently managing its payables and paying suppliers in a timely manner.

4. Working Capital Turnover: The working capital turnover ratio reflects how effectively the company is utilizing its working capital to generate sales. Federal Signal Corp.'s working capital turnover ratio has fluctuated over the years, with the lowest ratio in 2020 and the highest in 2019. A higher working capital turnover ratio indicates efficient utilization of working capital to drive sales.

In conclusion, Federal Signal Corp. has shown varying performance in its activity ratios over the past five years. The company has demonstrated efficiency in managing inventory levels, collecting receivables, and paying suppliers, which are essential factors in maintaining a healthy cash flow and optimizing asset utilization.

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Average number of days

Activity ratios provide insight into how efficiently a company manages its resources. Let's analyze the activity ratios of Federal Signal Corp. based on the provided data:

1. Days of Inventory on Hand (DOH): Federal Signal Corp. has seen fluctuations in its inventory management over the past five years. In 2023, the company held inventory for an average of 87.03 days, showing an improvement from the previous year but still higher than in 2020. This indicates that the company is taking slightly longer to sell its inventory compared to earlier years.

2. Days of Sales Outstanding (DSO): The DSO figure represents the average number of days it takes for Federal Signal Corp. to collect revenue from sales. The trend over the years has been relatively stable, with a slight decrease in 2023 to 39.45 days. This suggests that the company has been effective in managing its accounts receivable and collecting payments from customers promptly.

3. Number of Days of Payables: This ratio reflects the number of days it takes for Federal Signal Corp. to pay its creditors. The company has shown a decreasing trend in the number of days of payables over the years, reaching 19.13 days in 2023. A lower number of days of payables indicates that the company is settling its obligations to suppliers more quickly, which can have implications for cash flow management.

Overall, the analysis of these activity ratios indicates that while Federal Signal Corp. has made improvements in its accounts receivable and payables management, there is room for further optimization in inventory turnover to enhance overall operational efficiency.

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Long-term

The long-term activity ratios for Federal Signal Corp. provide insights into the efficiency with which the company is utilizing its fixed assets and total assets to generate sales revenue.

1. Fixed Asset Turnover:
The fixed asset turnover ratio measures how efficiently the company is generating sales from its investment in fixed assets like property, plant, and equipment. Federal Signal Corp. has shown a consistent pattern of improvement in this ratio from 2019 to 2021, with a peak in 2019 at 5.89, but a subsequent decline in 2023 to 5.29. This indicates that the company is efficiently utilizing its fixed assets, although there has been a slight decrease in efficiency in recent years.

2. Total Asset Turnover:
The total asset turnover ratio evaluates how well the company is utilizing all its assets (both fixed and current) to generate revenue. Federal Signal Corp. has shown variations in this ratio over the years, with a low of 0.89 in 2021 and a high of 1.06 in 2023. The ratio being consistently below 1 indicates that the company is not generating high sales revenue in relation to its total assets, but the improvement in 2023 suggests enhanced efficiency in asset utilization.

In summary, Federal Signal Corp. has exhibited a satisfactory level of efficiency in utilizing its fixed assets, as indicated by the fixed asset turnover ratio. However, the company's total asset turnover ratio suggests room for improvement in generating sales revenue relative to its total asset base. Further analysis of the factors affecting asset utilization and revenue generation may be needed to identify areas for enhancement in operational efficiency.