Genuine Parts Co (GPC)

Short-term

Turnover ratios

Genuine Parts Co.'s activity ratios provide insights into how efficiently the company manages its inventory, receivables, payables, and working capital.

1. Inventory turnover: The company's inventory turnover has been relatively stable over the five-year period, ranging between 3.10 and 3.41 times per year. This suggests that Genuine Parts Co. is effectively selling and replenishing its inventory. A higher turnover ratio indicates that the company is efficiently managing its inventory levels.

2. Receivables turnover: Genuine Parts Co.'s receivables turnover has shown consistency and improvement over the period, increasing from 7.36 in 2019 to 10.39 in 2023. This indicates that the company is collecting its accounts receivable more efficiently. A higher turnover ratio implies that Genuine Parts Co. is converting its credit sales into cash quicker, which is a positive sign for its liquidity.

3. Payables turnover: The payables turnover ratio has been relatively stable over the years, with a slight decrease from 3.18 in 2019 to 2.69 in 2023. This implies that Genuine Parts Co. is taking slightly longer to pay its suppliers. However, this could also mean that the company is taking advantage of trade credit terms effectively.

4. Working capital turnover: The working capital turnover ratio has varied over the years, with significant fluctuations. The ratio dropped from 19.54 in 2022 to 12.98 in 2023. A higher working capital turnover ratio indicates that Genuine Parts Co. is generating sales relative to the level of working capital invested in the business. The decrease in the ratio could mean a potential change in sales efficiency or working capital management.

Overall, Genuine Parts Co.'s activity ratios reflect a mixed performance in managing its operating assets and liabilities. The company should continue to monitor these ratios to ensure efficient utilization of resources and maintain healthy liquidity levels.

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Average number of days

Activity ratios are a key set of financial metrics that provide insights into how efficiently a company manages its assets and operations. In the case of Genuine Parts Co., let's analyze their activity ratios based on the data provided:

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows that the company's inventory turnover has been relatively stable over the years, ranging from 106.94 days in 2019 to 117.60 days in 2020. However, there was a slight decrease in inventory days in 2023 compared to the previous year.
- A higher number of days of inventory on hand indicates that the company may be holding onto excess inventory, tying up capital that could be used elsewhere. It may also suggest potential issues with inventory management efficiency.

2. Days of Sales Outstanding (DSO):
- Genuine Parts Co. has shown an improvement in its DSO over the years, with a decreasing trend from 49.60 days in 2019 to 34.36 days in 2020. There was a slight increase in DSO in 2023 compared to the previous year.
- A lower DSO indicates that the company is collecting its accounts receivable more quickly, which is a positive sign of effective credit management and efficient collection practices.

3. Number of Days of Payables:
- The trend in the number of days of payables indicates a relatively stable pattern, hovering around 135-143 days over the years. This suggests that Genuine Parts Co. takes an average of around 135 to 143 days to pay its suppliers.
- A longer number of days of payables suggests that the company is able to effectively manage its working capital by extending the time it takes to pay its suppliers, thus potentially improving its cash flow position.

In conclusion, Genuine Parts Co. displays mixed efficiency in managing its inventory, accounts receivable, and payables. While the company has made progress in reducing its DSO, it may benefit from further improvements in its inventory management practices to optimize its working capital and operational efficiency.

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Long-term

Genuine Parts Co. shows a declining trend in its fixed asset turnover ratio over the past five years, indicating a reduction in the efficiency with which the company generates sales from its fixed assets. The fixed asset turnover ratio has decreased from 15.96 in 2019 to 14.28 in 2023, suggesting that the company is generating fewer sales from its fixed assets.

On the other hand, the total asset turnover ratio has fluctuated slightly over the same period, with a slight increase in 2023 compared to the previous year. This ratio measures how efficiently the company is utilizing all its assets to generate sales. Despite the volatility, the total asset turnover ratio remains relatively stable around 1.3, indicating that Genuine Parts Co. is effectively generating sales in relation to its total assets.

Overall, the decline in the fixed asset turnover ratio coupled with the stable total asset turnover ratio suggests that Genuine Parts Co. may need to reassess its utilization of fixed assets to improve efficiency and profitability in the long term.