Inter Parfums Inc (IPAR)

Short-term

Turnover ratios

Interpreting the activity ratios of Inter Parfums Inc provides insights into the company's efficiency in managing its operational assets and liabilities.

1. Inventory Turnover:
- Inter Parfums Inc's inventory turnover shows an improvement over the years, increasing from 1.31 in 2020 to 3.56 in 2024.
- A higher inventory turnover ratio indicates that the company is selling its inventory more quickly, which can be a positive sign of efficient inventory management and reduced carrying costs.

2. Receivables Turnover:
- The receivables turnover ratio also reflects an upward trend from 4.19 in 2020 to 5.16 in 2024.
- This indicates that Inter Parfums Inc is collecting its receivables more frequently over the years, which is beneficial for maintaining healthy cash flow and reducing the risk of bad debts.

3. Payables Turnover:
- The payables turnover ratio for Inter Parfums Inc shows some fluctuations but generally increased significantly from 5.85 in 2020 to 14.54 in 2024.
- A higher payables turnover ratio suggests that the company is paying its suppliers more quickly, which may indicate good relationships with vendors but could also indicate potential cash flow constraints.

4. Working Capital Turnover:
- The working capital turnover ratio demonstrates an increasing trend from 1.21 in 2020 to 2.49 in 2024.
- This suggests that Inter Parfums Inc is generating more revenue per dollar of working capital employed, indicating efficient utilization of resources to drive sales growth.

Overall, the improving activity ratios of Inter Parfums Inc reflect enhanced operational efficiency in managing inventory, receivables, payables, and working capital over the years, which can positively impact the company's financial performance and sustainability in the long run.

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Average number of days

Interpreting the activity ratios of Inter Parfums Inc based on the provided data, we observe the following trends:

1. Days of Inventory on Hand (DOH):
- In 2020, the company held inventory for an average of 278.34 days before it was sold.
- The DOH decreased to 225.06 days by the end of 2021, indicating improved inventory management efficiency.
- However, the DOH increased to 269.82 days in 2022 and further to 283.58 days in 2023, suggesting a buildup of inventory levels.
- A significant improvement was noted in 2024, with the DOH plummeting to 102.55 days, possibly indicating more effective inventory control and faster turnover.

2. Days of Sales Outstanding (DSO):
- The DSO represents the average number of days it takes for the company to collect revenue after a sale.
- Inter Parfums Inc had a DSO of 87.14 days in 2020, which decreased to 70.47 days by the end of 2021, indicating a quicker collection of receivables.
- The DSO remained relatively stable around the low 70s range from 2022 to 2024, suggesting consistent efficiency in collecting sales revenue.

3. Number of Days of Payables:
- This ratio shows the average number of days it takes for the company to pay its suppliers or vendors.
- In 2020, Inter Parfums Inc took 62.35 days on average to settle payables, indicating a moderately proactive approach to payments.
- The number of days of payables increased significantly to 92.76 days in 2021 but declined to 82.24 days in 2022.
- Subsequently, the company further reduced its payment time to 74.28 days in 2023 and significantly to 25.11 days in 2024, indicating a more aggressive payment strategy.

Overall, the analysis suggests that Inter Parfums Inc has made improvements in managing its inventory, collecting sales revenue, and efficiently dealing with its payables over the years, as reflected in the activity ratios.

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Long-term

Interpreting the long-term activity ratios of Inter Parfums Inc reveals important insights into the company's efficiency in utilizing its assets.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how effectively the company generates revenue from its fixed assets.
- In 2020, the company had a very high fixed asset turnover of 27.53, indicating that it generated $27.53 in sales for every $1 invested in fixed assets.
- However, this ratio decreased significantly in subsequent years, reaching 5.89 in 2021, 6.52 in 2022, 7.79 in 2023, and 9.44 in 2024.
- The declining trend in fixed asset turnover suggests that Inter Parfums Inc may be experiencing challenges in efficiently utilizing its fixed assets to generate revenue.

2. Total Asset Turnover:
- The total asset turnover ratio indicates how efficiently the company is using all its assets to generate sales.
- In 2020, the total asset turnover was 0.61, meaning that for every dollar invested in assets, the company generated $0.61 in sales.
- The total asset turnover improved over the years, reaching 0.77 in 2021, 0.83 in 2022, 0.96 in 2023, and 1.03 in 2024.
- This increasing trend in total asset turnover suggests that Inter Parfums Inc has been more effective in utilizing its total assets to generate revenue, despite the declining trend in fixed asset turnover.

Overall, the analysis of these long-term activity ratios indicates that while the company's efficiency in utilizing fixed assets has decreased over the years, it has shown improvement in using its total assets more effectively to generate sales. Further investigation into the reasons behind the declining fixed asset turnover may be warranted to identify opportunities for improvement in asset management and operational efficiency.