Garmin Ltd (GRMN)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 2.54 | 2.29 | 1.89 | 2.27 | 3.03 |
| Receivables turnover | 6.39 | 6.45 | 7.39 | 5.85 | 4.93 |
| Payables turnover | 10.41 | 12.17 | 13.46 | 7.53 | 8.92 |
| Working capital turnover | 1.64 | 1.67 | 1.77 | 1.75 | 1.67 |
The activity ratios of Garmin Ltd provide insight into the efficiency of the company's operations in managing various aspects of its working capital.
1. Inventory turnover:
- The inventory turnover ratio measures how effectively a company manages its inventory by showing how many times the inventory is sold and replaced during a specific period.
- Garmin Ltd's inventory turnover decreased from 3.03 in 2020 to 2.54 in 2024. This suggests a declining efficiency in managing inventory turnover over the years.
2. Receivables turnover:
- The receivables turnover ratio indicates how efficiently a company collects its accounts receivables within a given period.
- Garmin Ltd's receivables turnover increased from 4.93 in 2020 to 6.39 in 2024, indicating an improvement in collecting receivables efficiently over the years.
3. Payables turnover:
- The payables turnover ratio measures how efficiently a company is paying its suppliers and vendors within a specific period.
- Garmin Ltd's payables turnover fluctuated over the years, from 8.92 in 2020 to 10.41 in 2024. The increase in 2024 may suggest a potential delay in paying suppliers compared to previous periods.
4. Working capital turnover:
- The working capital turnover ratio shows how effectively a company utilizes its working capital to generate sales.
- Garmin Ltd's working capital turnover remained relatively stable around 1.6-1.8 from 2020 to 2024, indicating consistent efficiency in utilizing working capital to generate sales over the years.
Overall, while Garmin Ltd has shown improvements in managing receivables turnover, there are fluctuations in inventory and payables turnover ratios that may warrant further analysis to enhance efficiency in managing these aspects of its operations.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 143.85 | 159.05 | 193.35 | 160.72 | 120.40 |
| Days of sales outstanding (DSO) | days | 57.15 | 56.63 | 49.42 | 62.35 | 73.98 |
| Number of days of payables | days | 35.07 | 29.99 | 27.11 | 48.45 | 40.90 |
Based on the provided data for Garmin Ltd's activity ratios, we can analyze the company's performance in managing its inventory, sales, and payables turnover over the years.
1. Days of Inventory on Hand (DOH):
- Garmin's DOH indicates the average number of days it takes for the company to sell its inventory. The trend shows a fluctuation in inventory turnover efficiency. The days of inventory on hand increased from 120.40 days in 2020 to 193.35 days in 2022, suggesting slower inventory turnover. However, there was a decrease in DOH to 143.85 days by the end of 2024, indicating an improvement in inventory management.
2. Days of Sales Outstanding (DSO):
- DSO reflects the average number of days it takes for Garmin to collect its accounts receivables. The trend in DSO shows a decreasing pattern over the years, from 73.98 days in 2020 to 57.15 days in 2024. This indicates that Garmin has been collecting its receivables more efficiently and quickly, which is a positive sign for cash flow management.
3. Number of Days of Payables:
- The number of days of payables indicates how long it takes Garmin to pay its suppliers. The trend shows fluctuations in the time taken to settle payables, with an increase from 40.90 days in 2020 to 48.45 days in 2021, followed by a significant decrease to 27.11 days in 2022. The number of days of payables then increased slightly to 35.07 days by the end of 2024.
Overall, Garmin's activity ratios demonstrate various trends in inventory turnover, accounts receivables collection, and payables management. Efficient management of these activities is essential for maintaining liquidity and profitability. The company should continue to monitor and improve these ratios to optimize its working capital and operational efficiency.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.08 | 4.29 | 4.23 | 4.63 | 4.90 |
| Total asset turnover | 0.65 | 0.61 | 0.63 | 0.63 | 0.60 |
Garmin Ltd's fixed asset turnover ratio has shown a slight decline from 4.90 in 2020 to 4.23 in 2022 before experiencing a modest increase to 5.08 in 2024. This indicates that the company generated $4.23 of net sales for every dollar invested in fixed assets in 2022. The fluctuation in the fixed asset turnover ratio suggests variations in how efficiently the company is utilizing its fixed assets to generate revenue over the years.
In terms of total asset turnover, Garmin Ltd's ratio has been relatively stable, ranging from 0.60 in 2020 to 0.65 in 2024. This ratio highlights how effectively the company is utilizing its total assets to generate sales. A total asset turnover ratio of 0.65 in 2024 indicates that Garmin generated $0.65 in sales for every dollar invested in total assets.
Overall, Garmin Ltd's long-term activity ratios suggest that the company has been effectively managing its assets to generate sales over the years, with some fluctuations in the efficiency of utilizing fixed assets. The company's total asset turnover ratio indicates a consistent performance in utilizing its total assets to generate revenue.