Hormel Foods Corporation (HRL)

Short-term

Turnover ratios

Hormel Foods Corp.'s activity ratios provide insights into the efficiency of the company's management of its assets and liabilities. The inventory turnover has remained relatively stable over the past five years, indicating a consistent ability to sell and replace inventory. The receivables turnover has also shown stability, with an increasing trend, reflecting a strong ability to collect from customers.

The payables turnover has slightly increased over the years, suggesting that the company is taking longer to pay its bills, which could indicate improved cash management. The working capital turnover has experienced significant fluctuations, with a notable increase in the most recent year, indicating improved efficiency in generating sales revenue relative to the capital invested.

Overall, these ratios depict an efficient management of inventory, receivables, and working capital, reflecting the company's ability to operate effectively and manage its resources for optimal performance.

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Average number of days

Hormel Foods Corp.'s activity ratios provide insight into the efficiency of its inventory management, accounts receivable collection, and accounts payable payment. The days of inventory on hand (DOH) has increased slightly from 52.84 days in 2021 to 60.67 days in 2023, indicating a longer period it takes to sell its inventory. This may suggest a need for better inventory management to improve cash flow.

The days of sales outstanding (DSO) have fluctuated, with a decrease from 28.98 days in 2021 to 24.85 days in 2023. This indicates that the company's ability to collect revenue from sales has improved, reflecting efficient accounts receivable management.

The number of days of payables has also seen minor fluctuations, but overall, there has been relatively consistent performance in managing payments to suppliers.

In summary, Hormel Foods Corp. may benefit from exploring ways to optimize its inventory management to reduce DOH and further improve working capital efficiency. Nevertheless, the company has shown effective control over accounts receivable and payables, which is a positive indicator of its financial management.

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Long-term

The long-term activity ratios of Hormel Foods Corp. provide insights into the company's efficiency in utilizing its long-term assets to generate sales. The fixed asset turnover has exhibited a fluctuating trend over the past five years, with a peak of 5.83 in 2019 and a low of 5.06 in 2020. This ratio measures the company's ability to generate sales from its investments in property, plant, and equipment. A higher fixed asset turnover indicates efficient utilization of fixed assets to generate revenue.

Meanwhile, the total asset turnover has also shown variability, declining from 1.17 in 2019 to 0.90 in 2023. This ratio reflects the overall efficiency of the company in using all its assets to generate sales. A decreasing total asset turnover may signify a decrease in sales generated from the company's total assets, pointing to potential inefficiencies in asset utilization or changes in sales volume relative to the size of the asset base.

In conclusion, the fixed asset turnover indicates strong efficiency in generating sales from the company's long-term assets, while the total asset turnover reflects fluctuations in the overall efficiency of asset utilization for revenue generation. Further analysis of the company's operations and industry dynamics may be necessary to fully understand the factors driving these trends.