HP Inc (HPQ)
Activity ratios
Short-term
Turnover ratios
| Oct 31, 2024 | Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 5.41 | 6.15 | 6.65 | 6.31 | 7.75 |
| Receivables turnover | 7.34 | 9.62 | 49.54 | 8.09 | 7.58 |
| Payables turnover | 2.47 | 3.01 | 3.31 | 3.11 | 3.14 |
| Working capital turnover | — | — | — | — | — |
Inventory turnover measures how efficiently a company is managing its inventory. HP Inc's inventory turnover has been decreasing over the past five years, from 7.75 in 2020 to 5.41 in 2024. This suggests that the company is holding onto its inventory for a longer period before selling it.
Receivables turnover indicates how quickly a company collects its accounts receivable. HP Inc's receivables turnover fluctuated significantly, with a sharp increase to 49.54 in 2022, possibly due to changes in credit terms or collection practices. The ratio decreased to 7.34 in 2024, which may imply a slower collection of receivables.
Payables turnover reflects how efficiently a company pays its suppliers. HP Inc's payables turnover also declined over the period, indicating that the company is taking longer to pay its suppliers. This could be a deliberate strategy to manage cash flow or negotiate more favorable payment terms.
Working capital turnover, unfortunately, is not provided in the data. This ratio typically assesses how well a company is utilizing its working capital to generate sales. The absence of this ratio makes it difficult to evaluate how effectively HP Inc is using its working capital.
In summary, HP Inc's activity ratios show a mixed performance in managing its inventory, collecting receivables, and paying suppliers efficiently. Further analysis and consideration of industry benchmarks would be useful to gauge the company's effectiveness in operating its asset management cycle.
Average number of days
| Oct 31, 2024 | Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 67.51 | 59.34 | 54.87 | 57.83 | 47.11 |
| Days of sales outstanding (DSO) | days | 49.73 | 37.96 | 7.37 | 45.12 | 48.16 |
| Number of days of payables | days | 147.81 | 121.46 | 110.28 | 117.22 | 116.16 |
HP Inc's activity ratios show changes in the efficiency of its inventory management, accounts receivable collection, and accounts payable.
1. Days of Inventory on Hand (DOH):
The DOH indicates the number of days it takes for HP Inc to sell its inventory. An increasing trend in DOH from 2020 to 2024 (47.11 to 67.51 days) suggests a longer period to turn over inventory, which may indicate slower sales or excessive inventory levels. This could tie up working capital and potentially lead to storage costs.
2. Days of Sales Outstanding (DSO):
The DSO measures how quickly HP Inc collects payments from its customers. The significant increase in DSO in 2022 (7.37 days) compared to the other years indicates a notable delay in collecting receivables that year. This may impact cash flows and liquidity if customers are taking longer to pay.
3. Number of Days of Payables:
The number of days of payables shows the average time HP Inc takes to pay its suppliers. A general increasing trend in payables days from 2020 to 2024 (116.16 to 147.81 days) suggests the company is taking longer to pay its suppliers. This can be advantageous as it allows for better cash flow management and potentially indicates improved negotiation power with suppliers.
Overall, while an increase in DSO and DOH can signal inefficiencies, a rise in the number of days of payables may indicate a strategic approach to cash flow management. Investors and stakeholders should monitor these ratios over time to assess HP Inc's operational efficiency and working capital management.
See also:
HP Inc Short-term (Operating) Activity Ratios
Long-term
| Oct 31, 2024 | Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 18.38 | 19.00 | 22.68 | 24.93 | 21.56 |
| Total asset turnover | 1.34 | 1.45 | 1.63 | 1.64 | 1.63 |
HP Inc's long-term activity ratios provide insights into how efficiently the company is utilizing its assets to generate sales revenue.
The fixed asset turnover ratio, which measures how effectively the company is using its fixed assets to generate sales, has decreased from 24.93 in 2021 to 18.38 in 2024. This decline indicates that HP Inc is generating less revenue per dollar of fixed assets invested over the years. While the ratio has fluctuated, it still remains relatively high, suggesting that the company continues to efficiently utilize its fixed assets, albeit at a lower level compared to previous years.
On the other hand, the total asset turnover ratio, which reflects how well the company is utilizing all its assets to generate revenue, has shown a slight decrease from 1.64 in 2021 to 1.34 in 2024. This decline indicates that HP Inc is generating slightly less revenue per dollar of total assets, implying a decrease in overall asset efficiency over the years.
Overall, HP Inc's long-term activity ratios suggest that the company may need to focus on improving its asset utilization to generate more revenue efficiently, especially in relation to its fixed assets. Monitoring and optimizing asset turnover ratios can help HP Inc enhance its operational efficiency and profitability in the long run.