Hershey Co (HSY)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 6.65 | 7.03 | 7.08 | 4.61 | 5.35 |
| Receivables turnover | 13.30 | 14.51 | 13.30 | 13.25 | 14.05 |
| Payables turnover | 8.21 | 8.50 | 10.11 | 7.67 | 7.92 |
| Working capital turnover | — | — | — | 7.50 | 73.74 |
Activity ratios provide insight into how efficiently Hershey Company is managing its assets and liabilities to generate sales and cash flow.
1. Inventory Turnover: Hershey Company's inventory turnover has been relatively stable over the past five years, ranging between 4.60 and 5.35. This indicates that the company is effectively managing its inventory levels, with goods being sold and replaced at a consistent pace.
2. Receivables Turnover: The receivables turnover ratio has also remained relatively stable over the years, ranging from 13.25 to 14.65. This suggests that Hershey is efficient in collecting its accounts receivables, with customers paying their dues within a reasonable timeframe.
3. Payables Turnover: The payables turnover ratio has shown a declining trend from 2019 to 2023, decreasing from 7.92 to 5.68. This indicates that Hershey is taking longer to pay its suppliers, which could be due to various factors such as changing payment terms or cash flow management strategies.
4. Working Capital Turnover: The working capital turnover ratio was not provided for the years before 2020, but it shows a significant decrease from 73.74 in 2019 to an unspecified value in 2020. This suggests that Hershey may be utilizing its working capital less efficiently to generate sales, which could be a cause for further investigation.
In summary, Hershey Company appears to be effectively managing its inventory and receivables, but there may be room for improvement in managing payables and working capital to enhance overall efficiency and cash flow management.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 54.91 | 51.92 | 51.54 | 79.11 | 68.19 |
| Days of sales outstanding (DSO) | days | 27.44 | 25.16 | 27.43 | 27.55 | 25.98 |
| Number of days of payables | days | 44.47 | 42.95 | 36.10 | 47.59 | 46.07 |
Activity ratios such as Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables provide insight into how efficiently Hershey Company is managing its inventory, collecting receivables, and paying suppliers.
1. Days of Inventory on Hand (DOH) measures how many days, on average, Hershey holds inventory before selling it. The trend shows an increase in DOH from 2019 to 2023, indicating a longer time to sell inventory, which may tie up funds and increase storage costs.
2. Days of Sales Outstanding (DSO) represents the average time it takes Hershey to collect revenue from credit sales. The DSO trend shows fluctuations but remains relatively stable over the years, implying a consistent collection process.
3. Number of Days of Payables indicates how long Hershey takes to pay its suppliers. The trend shows an increasing number of days of payables from 2019 to 2023, suggesting a longer time to settle payables, which may benefit cash flow but could strain supplier relationships.
In summary, the analysis of Hershey Company's activity ratios suggests that the company may need to focus on optimizing inventory management to reduce DOH, maintain efficient collection processes to manage DSO, and strike a balance between managing payables effectively and maintaining good relationships with suppliers.
See also:
Hershey Co Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.38 | 3.73 | 3.45 | 3.57 | 3.71 |
| Total asset turnover | 0.92 | 0.94 | 0.86 | 0.89 | 0.98 |
The Fixed Asset Turnover ratio for Hershey Company has ranged from 3.47 to 3.76 over the past five years, indicating that the company generates between $3.47 and $3.76 in sales for every dollar invested in fixed assets. The modest fluctuations suggest a relatively stable utilization of fixed assets to generate revenue.
On the other hand, the Total Asset Turnover ratio has fluctuated between 0.86 and 0.98 during the same period, showing that the company generates between $0.86 and $0.98 in sales for every dollar of total assets. The fluctuations in this ratio indicate some variability in how effectively Hershey is utilizing its total assets to generate revenue.
In general, both ratios suggest that Hershey has been efficiently utilizing its assets to generate sales, with the Fixed Asset Turnover ratio consistently higher than the Total Asset Turnover ratio. This indicates that the company is more effective in generating sales with its fixed assets compared to its total assets, possibly highlighting a high reliance on fixed assets in its operations.