Alphabet Inc Class A (GOOGL)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | — | 47.27 | 94.82 | 116.39 | 71.97 |
| Receivables turnover | 6.37 | 6.99 | 6.40 | 5.82 | 5.89 |
| Payables turnover | 17.79 | 24.61 | 18.38 | 15.16 | 12.93 |
| Working capital turnover | 3.41 | 2.95 | 2.08 | 1.55 | 1.51 |
The activity ratios of Alphabet Inc provide insight into the efficiency of the company's operational processes.
The inventory turnover ratio indicates that in 2022 and 2021, Alphabet Inc managed to turn over its inventory 47.28 and 94.82 times, respectively, which means that the company sold and replaced its inventory nearly 50 and 95 times during those years. However, in 2020 and 2019, this ratio decreased to 116.39 and 71.97, signaling that the company managed to sell and replace its inventory over 110 and 70 times during those years, respectively.
The receivables turnover ratio shows that the company collected its accounts receivable 6.41 times in 2023, indicating an improvement compared to previous years, where the ratio ranged from 5.82 to 7.03. This implies that the company was able to collect its receivables more effectively in 2023.
The payables turnover ratio indicates that in 2023, Alphabet Inc paid its accounts payable 17.79 times during the year, demonstrating a decrease compared to 2022. This implies that the company managed its payments less effectively in 2023 compared to 2022.
The working capital turnover ratio increased steadily over the past five years, reaching 3.43 in 2023, indicating an improvement in the company's ability to generate sales revenue using its working capital.
Overall, Alphabet Inc's activity ratios reflect mixed performance in managing its inventory, receivables, and payables, with an overall improvement in working capital turnover.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | — | 7.72 | 3.85 | 3.14 | 5.07 |
| Days of sales outstanding (DSO) | days | 57.29 | 52.24 | 57.05 | 62.76 | 62.00 |
| Number of days of payables | days | 20.51 | 14.83 | 19.86 | 24.08 | 28.23 |
To analyze the activity ratios of Alphabet Inc, we will focus on the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables (DPO) for the years 2019 to 2023.
The Days of Inventory on Hand (DOH) measures how many days it takes for the company to turn its inventory into sales. In 2023, there is no data for DOH, but in 2022, it increased to 7.72 days from 3.85 days in 2021, indicating that the company took longer to sell its inventory. This could suggest potential issues with inventory management. However, without 2023 data, the trend is uncertain.
The Days of Sales Outstanding (DSO) shows the average number of days it takes for the company to collect revenue after a sale. In 2023, DSO increased to 56.95 days from 51.95 days in 2022, indicating a slower collection of receivables. This trend suggests a potential increase in the collection period, possibly due to changes in customer payment behavior or credit terms.
The Number of Days of Payables (DPO) measures the average number of days it takes for the company to pay its outstanding bills. In 2023, DPO increased to 20.52 days from 14.83 days in 2022, indicating a longer time to settle payables. This trend may suggest a more conservative approach to managing cash flow through delayed payments.
Overall, the increase in DSO and DPO, along with the lack of DOH data for 2023, indicate potential concerns regarding inventory management and cash flow. Further analysis and consideration of industry benchmarks would be necessary to fully assess the implications of these trends on Alphabet Inc's operating efficiency and financial performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.27 | 2.50 | 2.64 | 2.15 | 2.20 |
| Total asset turnover | 0.76 | 0.77 | 0.72 | 0.57 | 0.59 |
The fixed asset turnover ratio measures how effectively a company utilizes its fixed assets to generate sales, while the total asset turnover ratio indicates the firm's ability to generate sales relative to its total assets.
Looking at Alphabet Inc's long-term activity ratios, we observe a declining trend in both the fixed asset turnover and total asset turnover ratios from 2019 through 2023. This trend suggests a decreased efficiency in utilizing fixed assets to generate sales and a declining ability to generate sales relative to total assets over this period.
The fixed asset turnover ratio decreased from 2.20 in 2019 to 2.29 in 2023, indicating a decrease in the company's ability to generate sales from its fixed assets. Similarly, the total asset turnover ratio decreased from 0.59 in 2019 to 0.76 in 2023, reflecting a decrease in the company's ability to generate sales relative to its total assets over the same period.
This declining trend in both ratios may indicate areas for further analysis, such as potentially underutilized fixed assets or challenges in efficiently generating sales from the total asset base. It could also signify changes in the company's business model, investment strategy, or market dynamics that have impacted its asset utilization and sales generation. Further investigation into the factors driving this trend would be beneficial for a comprehensive understanding of Alphabet Inc's long-term activity performance.