KLA-Tencor Corporation (KLAC)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Inventory turnover	1.29	1.47	1.67	1.76	1.87
Receivables turnover	5.16	5.42	4.57	4.72	4.59
Payables turnover	10.93	11.37	8.10	8.10	10.71
Working capital turnover	1.83	2.27	2.14	1.93	1.92

KLA-Tencor Corporation's activity ratios provide insights into the efficiency of the company's operations in managing inventory, receivables, payables, and working capital over the past five years.

1. Inventory Turnover:
- The inventory turnover ratio has been declining from 1.87 in 2020 to 1.29 in 2024.
- This indicates that the company is selling its inventory at a slower pace in recent years, which may lead to excess inventory levels or a reduction in sales.

2. Receivables Turnover:
- The receivables turnover ratio has fluctuated over the years, with a peak in 2023 at 5.83 and a decrease to 5.36 in 2024.
- The declining trend suggests that the company is taking longer to collect payments from its customers, which could impact its cash flow and liquidity.

3. Payables Turnover:
- The payables turnover ratio has been relatively stable, ranging from 8.10 to 11.37 over the past five years.
- This indicates that the company is efficiently managing its accounts payable by paying suppliers within a reasonable timeframe.

4. Working Capital Turnover:
- The working capital turnover ratio has shown variations but has been relatively consistent around 1.92 to 2.21, except for a minor decrease in 2024 to 1.83.
- This ratio reflects how effectively the company is utilizing its working capital to generate sales revenue. The decreasing trend in 2024 suggests a slightly lower efficiency in converting working capital into sales compared to previous years.

Overall, KLA-Tencor Corporation's activity ratios highlight some challenges in inventory management and collection of receivables, which may require attention to improve efficiency and maintain healthy working capital turnover in the future.

Average number of days

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Days of inventory on hand (DOH)	days	281.99	248.92	218.13	207.42	195.34
Days of sales outstanding (DSO)	days	70.76	67.30	79.89	77.31	79.46
Number of days of payables	days	33.40	32.10	45.04	45.04	34.07

The activity ratios of KLA-Tencor Corporation over the past five years indicate the efficiency of the company's inventory management, accounts receivable collection, and accounts payable settlement.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increasing number of days it takes for the company to sell its inventory, from 195.34 days in 2020 to 281.99 days in 2024.
- This indicates a potential issue with slow-moving inventory or overstocking, which could tie up capital and impact profitability.

2. Days of Sales Outstanding (DSO):
- DSO has fluctuated over the years, with a general increase from 62.65 days in 2023 to 68.14 days in 2024.
- This suggests that the company is taking slightly longer to collect payments from customers, which could impact cash flow and liquidity.

3. Number of Days of Payables:
- The number of days of payables has varied over the years but remained relatively stable, ranging from 32.10 days in 2023 to 45.04 days in 2022 and 2021.
- A higher number of days of payables may indicate that the company is taking longer to settle its obligations to suppliers, potentially benefiting cash flow.

Overall, the analysis of these activity ratios suggests that KLA-Tencor Corporation may need to focus on improving inventory management efficiency and reducing the collection period for accounts receivable to enhance its overall financial performance and liquidity position.

Long-term

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Fixed asset turnover	—	10.17	10.84	10.44	11.17
Total asset turnover	0.64	0.75	0.73	0.67	0.63

The Fixed Asset Turnover ratio measures the efficiency of KLA-Tencor Corporation in utilizing its fixed assets to generate sales. Over the past five years, the company's Fixed Asset Turnover ratio has shown a decreasing trend from 11.17 in 2020 to 8.85 in 2024. This indicates that the company is generating less revenue per dollar of fixed assets invested, which could suggest potential inefficiencies in the utilization of its fixed assets.

On the other hand, the Total Asset Turnover ratio reflects how well KLA-Tencor is utilizing all its assets (both fixed and current) to generate sales. The Total Asset Turnover ratio has also shown a declining trend over the same period, decreasing from 0.63 in 2020 to 0.64 in 2024. This suggests that the company is generating less revenue for each dollar of total assets deployed, indicating a decrease in overall asset efficiency.

In conclusion, based on the long-term activity ratios, it appears that KLA-Tencor Corporation has been experiencing decreasing efficiency in utilizing both its fixed assets and total assets to generate sales over the past five years. This trend may raise concerns about the company's operational effectiveness and asset utilization strategies.