HP Inc (HPQ)
Activity ratios
Short-term
Turnover ratios
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 6.15 | 6.65 | 6.31 | 7.75 | 8.30 |
| Receivables turnover | 9.62 | 49.54 | 8.09 | 7.58 | 7.36 |
| Payables turnover | 3.01 | 3.31 | 3.11 | 3.14 | 3.22 |
| Working capital turnover | — | — | — | — | — |
The inventory turnover ratio for HP Inc has shown a decreasing trend over the past five years, falling from 8.30 in 2019 to 6.15 in 2023. This indicates that the company's efficiency in managing its inventory has declined.
On the other hand, the receivables turnover ratio has depicted a fluctuating pattern, with an overall increase from 6.57 in 2019 to 8.34 in 2023. This suggests an improvement in the company's ability to collect outstanding receivables over the years.
The payables turnover ratio has demonstrated a gradual decline from 3.22 in 2019 to 3.01 in 2023, indicating a decrease in the speed at which HP Inc pays its suppliers.
The working capital turnover ratio data is not provided for analysis. Working capital turnover ratio measures the relationship between sales and working capital, thus a missing value for this ratio makes it difficult to assess the efficiency of HP Inc in utilizing its working capital across the years.
Overall, the trends in the activity ratios suggest varying patterns in HP Inc's management of inventory, receivables, and payables, which warrant a closer examination of the company's operations and financial management.
Average number of days
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 59.34 | 54.87 | 57.83 | 47.11 | 43.98 |
| Days of sales outstanding (DSO) | days | 37.96 | 7.37 | 45.12 | 48.16 | 49.59 |
| Number of days of payables | days | 121.46 | 110.28 | 117.22 | 116.16 | 113.47 |
To analyze HP Inc's activity ratios, we will use the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables.
Starting with the DOH, we observe an increasing trend over the past five years, indicating that inventory turnover has slowed down. This suggests that HP Inc may be carrying excess inventory, which can tie up capital and increase storage costs.
Moving on to the DSO, we see a fluctuating pattern with a slight decrease in the most recent year. This metric reflects the average number of days it takes for HP Inc to collect payment after a sale. The recent improvement suggests more efficient collections, which can enhance cash flow and liquidity.
Finally, considering the number of days of payables, we note a consistent increase over the years, indicating that HP Inc has been taking longer to pay its suppliers. While this can contribute to improved cash flow in the short term, it may strain relationships with vendors and impact future purchasing terms.
Overall, HP Inc's activity ratios depict a mixed performance, with challenges in inventory management but improvements in accounts receivable collection. The increase in payment days to suppliers should be carefully monitored to ensure it does not adversely affect the company's vendor relationships.
See also:
HP Inc Short-term (Operating) Activity Ratios
Long-term
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 19.00 | 22.68 | 24.93 | 21.56 | 21.03 |
| Total asset turnover | 1.45 | 1.63 | 1.64 | 1.63 | 1.76 |
The long-term activity ratios of HP Inc, particularly the fixed asset turnover and total asset turnover, provide insight into the company's efficiency in utilizing its assets to generate sales.
The fixed asset turnover ratio has shown a declining trend over the past five years, decreasing from 24.94 in 2021 to 19.00 in 2023. This indicates that HP Inc's efficiency in generating sales from its fixed assets has declined, meaning that the company is generating fewer sales in relation to its investment in fixed assets over time.
Conversely, the total asset turnover ratio has also exhibited a downward trend, declining from 1.76 in 2019 to 1.45 in 2023. This suggests a reduction in the overall efficiency of HP Inc in generating sales from its total assets.
In summary, the declining long-term activity ratios for HP Inc may indicate a need for the company to reassess its asset utilization strategies and consider potential improvements to enhance its efficiency in generating sales relative to its investment in fixed and total assets.