Garmin Ltd (GRMN)

Short-term

Turnover ratios

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company is managing its inventory. Garmin's inventory turnover has been relatively stable over the past five years, ranging from 1.89 to 3.03 times per year.
- The increasing trend in inventory turnover from 2020 to 2021 and then a slight decrease in 2023 suggests that Garmin has been managing its inventory more efficiently, but there was a slight dip in efficiency in 2023 compared to 2021.

2. Receivables Turnover:
- The receivables turnover ratio indicates how quickly a company collects its accounts receivable. Garmin's receivables turnover has shown fluctuations over the years, ranging from 4.93 to 7.39 times per year.
- The increasing trend in receivables turnover from 2020 to 2022 indicates that Garmin has been able to collect its receivables more efficiently during this period. However, there was a decrease in 2023, suggesting a longer collection period for receivables.

3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers. Garmin's payables turnover has varied over the years, ranging from 7.53 to 13.46 times per year.
- The decreasing trend in payables turnover from 2019 to 2021 followed by a slight increase in 2022 and then a decrease in 2023 indicates changes in Garmin's payment practices with suppliers. The company has been paying its suppliers more frequently in recent years.

4. Working Capital Turnover:
- The working capital turnover ratio shows how efficiently a company is using its working capital to generate sales revenue. Garmin's working capital turnover has fluctuated between 1.67 and 1.85 times per year.
- The relatively stable working capital turnover over the years suggests that Garmin has maintained a consistent level of efficiency in utilizing its working capital to generate sales.

Overall, the analysis of Garmin's activity ratios indicates that the company has been managing its inventory and working capital efficiently, but there have been fluctuations in collecting receivables and paying suppliers. Monitoring these ratios over time can provide insights into the company's operational effectiveness and financial management practices.

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Average number of days

Activity ratios help evaluate how efficiently a company manages its resources. Looking at Garmin Ltd's activity ratios over the past five years, we can observe some trends.

1. Days of Inventory on Hand (DOH):
- The DOH has fluctuated over the years, ranging from 120.40 days in 2020 to 193.35 days in 2022.
- A higher DOH implies slow inventory turnover, potentially indicating excess inventory or poor sales.
- In 2023, the DOH decreased to 159.05 days, which could indicate improved inventory management compared to the previous year.

2. Days of Sales Outstanding (DSO):
- The DSO shows how long it takes for the company to collect revenue after a sale.
- Garmin Ltd's DSO has varied over the years, with the lowest at 49.42 days in 2022 and the highest at 73.98 days in 2020.
- A lower DSO is generally favorable as it indicates faster collection of receivables. The decrease in DSO from 2022 to 2023 (from 49.42 days to 56.63 days) might suggest a slight deterioration in receivables collection efficiency.

3. Number of Days of Payables:
- The days of payables represent the average number of days a company takes to pay its suppliers.
- Garmin Ltd's days of payables have been fluctuating, with the lowest at 27.11 days in 2022 and the highest at 48.45 days in 2021.
- A higher number of days of payables can indicate a delay in paying suppliers, potentially benefiting cash flow but straining supplier relationships.

In conclusion, Garmin Ltd should aim to optimize its inventory management, enhance receivables collection efficiency, and carefully manage its payables to improve overall operational effectiveness and cash flow management.

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Long-term

The fixed asset turnover ratio measures how effectively a company is utilizing its fixed assets to generate sales. Garmin Ltd's fixed asset turnover has been relatively stable over the past five years, with a slight fluctuation ranging from 4.23 to 5.13. This indicates that the company has been consistently efficient in generating sales from its fixed assets.

On the other hand, the total asset turnover ratio measures how efficiently a company is using all its assets to generate revenue. Garmin Ltd's total asset turnover has also remained relatively consistent around 0.60 to 0.63 over the same period. This implies that the company has maintained a stable level of efficiency in utilizing all its assets to generate revenue.

Overall, Garmin Ltd's long-term activity ratios suggest that the company has been effectively utilizing both its fixed and total assets to generate sales over the past five years. The stable performance in these ratios indicates good operational efficiency and asset utilization by the company.