KB Home (KBH)

Short-term

Turnover ratios

The inventory turnover of KB Home has exhibited a fluctuating trend over the past five years, with a slight increase in 2023 compared to the previous two years, indicating a moderate ability to manage and sell inventory. On the other hand, the receivables turnover has been quite high, suggesting a strong ability to collect outstanding payments from customers. The payables turnover has remained relatively stable, indicating a consistent ability to pay off short-term obligations.

The working capital turnover has shown some variability over the years, but overall, the company has been effectively utilizing its working capital to generate sales. This indicates a satisfactory level of efficiency in utilizing its current assets to generate revenue. Overall, the company's activity ratios suggest a reasonable level of efficiency in managing inventory, receivables, payables, and working capital.

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Average number of days

To perform a comprehensive analysis of KB Home's activity ratios, I will first calculate the relevant ratios and then interpret their implications.

Days of Inventory on Hand (DOH):
DOH measures how long it takes for the company to sell its inventory. A lower number is generally preferred as it indicates faster inventory turnover. KB Home's DOH has fluctuated over the past five years, with a decrease in 2019 followed by an increase in 2020 and subsequent decreases in 2021 and 2022. The latest figure for 2023 indicates a decrease to 372.50 days, suggesting that the company has been able to manage its inventory more efficiently compared to the previous year.

Days of Sales Outstanding (DSO):
DSO reflects the average number of days it takes for the company to collect revenue after a sale is made. A lower DSO is favorable as it indicates a shorter collection period. KB Home's DSO has varied over the years, with a notable decrease in 2022, an increase in 2023, and generally lower figures compared to 2020 and 2019. The latest figure for 2023 is 21.05 days, which is higher than the previous year, indicating a longer collection period.

Number of Days of Payables:
This ratio measures the average number of days the company takes to pay its suppliers. A higher number suggests that the company is taking longer to pay its payables. KB Home's number of days of payables has increased slightly over the past five years, with the 2023 figure at 28.19 days, showing a modest increase compared to the previous year.

Overall, by examining these activity ratios, we can see that while KB Home has made some improvements in managing its inventory, there have been mixed results in terms of its collection and payment cycles. The company may need to focus on optimizing its collection processes to reduce DSO and consider strategies for maintaining effective payables management.

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Long-term

The long-term activity ratios of KB Home, as reflected in the fixed asset turnover and total asset turnover, provide insights into the efficiency of the company's utilization of its long-term assets over a period of five years.

The fixed asset turnover ratio, which measures the efficiency of a company in generating net sales from its investment in fixed assets, has exhibited a fluctuating trend over the past five years. The ratio declined from 70.00 in 2019 to 63.82 in 2020, before displaying an increasing trend from 2020 to 2022 and then slightly decreasing in 2023. This indicates that KB Home's ability to generate sales from its fixed assets varied over the years, with the most recent ratio being at 72.59, which suggests a relatively high level of efficiency in utilizing fixed assets to generate sales.

The total asset turnover ratio, which indicates the company's ability to generate sales from its total assets, also displayed variability over the same period. The ratio increased from 0.91 in 2019 to 1.04 in 2022, indicating improved efficiency in generating sales from total assets. However, the ratio decreased to 0.96 in 2023, suggesting a slightly less efficient utilization of total assets to generate sales compared to the previous year.

Overall, the long-term activity ratios for KB Home show varying levels of efficiency in utilizing fixed and total assets to generate sales over the past five years. While the fixed asset turnover ratio exhibited an overall increasing trend, the total asset turnover ratio displayed both increases and decreases, indicating fluctuations in the company's ability to generate sales from its total assets during the period.