Lithia Motors Inc (LAD)

Short-term

Turnover ratios

Lithia Motors, Inc.'s activity ratios indicate how efficiently the company manages its assets and liabilities to generate sales.

1. Inventory Turnover:
- The company's inventory turnover has been fluctuating in the range of 5.43 to 7.55 times over the past eight quarters.
- This ratio measures how effectively the company is managing its inventory levels. A higher turnover indicates that inventory is selling quickly, which is generally positive for cash flow and profitability.
- The decreasing trend in inventory turnover from Q1 2022 to Q4 2023 may suggest a slowdown in sales relative to inventory levels.

2. Receivables Turnover:
- The receivables turnover ratio has varied between 27.01 and 34.67 over the same period.
- This ratio assesses how efficiently the company collects on credit sales. A higher turnover implies that receivables are being collected more rapidly, indicating strong cash flow generation.
- The increasing trend from Q1 2022 to Q2 2023 suggests an improvement in the company's credit management practices.

3. Payables Turnover:
- Lithia Motors' payables turnover ratio has shown some variability, ranging from 73.03 to 92.68 in the last eight quarters.
- This ratio evaluates how quickly the company pays its suppliers. A lower turnover could indicate that the company is taking longer to settle its payables, potentially improving its cash position and liquidity.
- The fluctuations in this ratio highlight changing payment practices that could impact the company's relationships with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio has also been inconsistent, moving between 14.85 and 23.78 over the observed quarters.
- This ratio reflects how efficiently the company utilizes its working capital to generate revenue. A higher ratio suggests that the company is effectively using its current assets to support sales.
- The fluctuations in this ratio indicate changes in the efficiency of utilizing working capital resources over time.

In conclusion, analyzing these activity ratios provides insights into how effectively Lithia Motors manages its assets and liabilities to support its business operations and generate revenues. The trends observed in these ratios can help stakeholders assess the company's operational efficiency and financial performance.

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Average number of days

Lithia Motors, Inc.'s activity ratios provide insights into the efficiency of the company's operations and management of its working capital.

1. Days of Inventory on Hand (DOH):
- The DOH shows the average number of days it takes for the company to sell its inventory.
- Over the past eight quarters, DOH has been fluctuating, ranging from a low of 48.33 days in Q1 2022 to a high of 67.22 days in Q4 2023.
- The increasing trend in DOH indicates that inventory turnover has been slowing down, which may tie up more capital in inventory.

2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes for the company to collect revenue after making a sale.
- This ratio has been relatively stable over the periods, with slight variations seen between quarters.
- A lower DSO suggests that the company is collecting its receivables more quickly, indicating effective credit management.

3. Number of Days of Payables:
- This ratio reflects how long the company takes to pay its suppliers.
- The number of days of payables has been relatively consistent over the quarters, with minor fluctuations observed.
- A longer period for payables may indicate that the company is effectively managing its cash flow by maintaining extended payment terms.

Overall, analyzing these activity ratios collectively can provide insights into how efficiently Lithia Motors, Inc. manages its inventory, collects receivables, and pays its suppliers. Management should continue to monitor these ratios to ensure optimal working capital management and operational efficiency.

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Long-term

The fixed asset turnover ratio for Lithia Motors, Inc. has been relatively stable over the quarters, ranging between 7.51 and 7.93. This ratio indicates that the company generates approximately $7.51 to $7.93 in revenue for every dollar invested in fixed assets. The consistent high fixed asset turnover suggests that Lithia Motors is efficiently utilizing its fixed assets to generate sales revenue.

On the other hand, the total asset turnover ratio has shown a decreasing trend over the quarters, declining from 2.09 in Q1 2022 to 1.58 in Q4 2023. This ratio reflects the company's ability to generate sales in relation to its total assets. The decreasing total asset turnover may indicate that Lithia Motors' efficiency in generating sales revenue from its total assets has decreased over the quarters.

Overall, while the fixed asset turnover remains high and stable, suggesting efficient utilization of fixed assets, the declining trend in total asset turnover raises some concerns about the company's overall asset efficiency and potential challenges in maximizing revenue generation from its total asset base. Further analysis and comparison with industry benchmarks may provide deeper insights into Lithia Motors' operational efficiency and asset utilization.