Greif Bros Corporation (GEF)

Short-term

Turnover ratios

Sure! I will analyze the activity ratios for Greif Inc based on the provided data.

1. Inventory Turnover:
The inventory turnover ratio measures how efficiently the company manages its inventory. Greif Inc's inventory turnover has been consistently strong over the past five years, with an average of 11.78. This indicates that the company is selling and replacing its inventory at a healthy rate. A high inventory turnover ratio suggests that the company is effectively managing its inventory levels, which can lead to lower holding costs and reduced risk of obsolescence.

2. Receivables Turnover:
The receivables turnover ratio reflects how quickly a company collects cash from its credit sales. Greif Inc's receivables turnover has also been consistently strong, with an average of 7.35. This indicates that the company has been efficient in collecting payments from its customers. A higher turnover ratio suggests that the company has effective credit policies and is able to swiftly convert credit sales into cash.

3. Payables Turnover:
The payables turnover ratio measures how efficiently a company pays its suppliers. Greif Inc's payables turnover has averaged 7.98 over the past five years, demonstrating that the company is efficient in managing its accounts payable. A higher payables turnover ratio suggests that the company is effectively managing its payment schedules and maintaining favorable relationships with its suppliers.

4. Working Capital Turnover:
The working capital turnover ratio evaluates the efficiency of a company's use of working capital to generate sales. Greif Inc's working capital turnover has shown a favorable trend, averaging 13.04 over the past five years. This indicates that the company has been effectively utilizing its working capital to support its sales activities. A higher working capital turnover ratio suggests that the company is efficiently deploying its working capital to generate revenue.

In conclusion, based on the activity ratios, Greif Inc appears to be effectively managing its inventory, receivables, payables, and working capital, which reflects positively on its operational efficiency and financial management.

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Average number of days

Days of Inventory on Hand (DOH) measures how efficiently a company manages its inventory. It is calculated by dividing the average inventory by the cost of goods sold, and then multiplying by 365 to get the number of days.

In 2023, Greif Inc had 30.35 days of inventory on hand, which indicates that the company held its inventory for an average of 30.35 days before selling it. This is a slight increase from 29.07 days in 2022 and a significant improvement from 40.83 days in 2021. The decrease in DOH from 2021 to 2022 and then a slight increase in 2023 suggests that the company may have improved its inventory management in 2022 but faced challenges in 2023.

Days of Sales Outstanding (DSO) measures the average number of days it takes for a company to collect payments after making a sale. It is calculated by dividing the accounts receivable by the annual sales and then multiplying by 365 days.

In 2023, Greif Inc had 46.12 days of sales outstanding, compared to 43.06 days in 2022. This increase in DSO may indicate that it took the company longer to collect payments from customers in 2023 compared to 2022. A higher DSO could be a sign of potential issues with the company's credit policy or the financial health of its customers.

Number of Days of Payables measures the average number of days it takes for a company to pay its suppliers. It is calculated by dividing accounts payable by cost of goods sold and then multiplying by 365 days.

In 2023, Greif Inc had 44.62 days of payables, which increased from 40.46 days in 2022. This increase suggests that the company took longer to pay its suppliers in 2023 compared to 2022. A lengthening payables period can provide the company with additional working capital, but it could also strain relationships with suppliers if not managed effectively.

Overall, the trends in the activity ratios for Greif Inc indicate some fluctuations in the efficiency of managing inventory, collecting payments from customers, and paying suppliers. These changes may be influenced by various factors, including market conditions, company strategy, and operational efficiency. Continual monitoring and analysis of these ratios can provide valuable insights into the company's financial performance and operational effectiveness.

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Long-term

The long-term activity ratios provide insight into how efficiently Greif Inc is utilizing its long-term assets to generate sales and overall asset turnover. Let's analyze the trends and implications of the fixed asset turnover and total asset turnover ratios for Greif Inc over the past five years.

Fixed Asset Turnover:
The fixed asset turnover ratio measures the efficiency of a company in generating sales from its investment in fixed assets such as property, plant, and equipment. A higher ratio signifies better utilization of fixed assets to generate sales revenue.

Over the past five years, Greif Inc's fixed asset turnover ratio has shown a fluctuating trend. It decreased from 2.72 in 2019 to 2.96 in 2020, then increased to 3.65 in 2021, before declining to 4.36 in 2022. In 2023, the ratio decreased to 3.34. The fluctuation in this ratio suggests varying degrees of effectiveness in utilizing its fixed assets to generate sales revenue over the years. The significant increase in 2022 could indicate improved efficiency in the utilization of fixed assets, while the subsequent decrease in 2023 could imply a potential slowdown in the production and sales processes.

Total Asset Turnover:
The total asset turnover ratio reflects how efficiently a company uses all of its assets to generate sales. It provides an overview of the effectiveness of asset utilization regardless of their short-term or long-term nature.

Greif Inc's total asset turnover ratio has also displayed fluctuations over the five-year period. The ratio increased from 0.85 in 2019 to 0.82 in 2020, then rose to 0.96 in 2021 before declining to 1.16 in 2022. In 2023, the ratio decreased to 0.88. This fluctuation suggests varying levels of efficiency in using its total assets to generate sales revenue. The significant increase in 2021 may indicate improved overall asset utilization efficiency, while the subsequent decrease in 2022 and 2023 suggests potential challenges in maximizing sales revenue from its total assets.

Overall, the fluctuating trends in both the fixed asset turnover and total asset turnover ratios indicate that Greif Inc's efficiency in utilizing its long-term assets to generate sales has varied over the years. It is essential for the company to closely monitor and assess its asset utilization strategies to ensure consistent and optimal productivity from its long-term assets.