Lincoln Electric Holdings Inc (LECO)

Short-term

Turnover ratios

Activity ratios measure how effectively a company manages its resources to generate revenues. Let's analyze Lincoln Electric Holdings, Inc.'s activity ratios:

1. Inventory Turnover:
- The inventory turnover ratio shows how many times a company's inventory is sold and replaced over a period.
- Lincoln Electric's inventory turnover has been relatively stable, ranging from 3.66 to 4.84 over the past eight quarters.
- The company is managing its inventory efficiently, with a consistent ability to turn over its inventory.

2. Receivables Turnover:
- The receivables turnover ratio indicates how efficiently a company collects cash from its credit sales.
- Lincoln Electric's receivables turnover has fluctuated between 6.59 and 7.93 over the past two years.
- The company's collection of receivables has been relatively steady, reflecting effective credit management practices.

3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers.
- Lincoln Electric's payables turnover has ranged from 6.11 to 8.38 over the past eight quarters.
- The company has been able to manage its payables effectively, maintaining a reasonable balance between payment timing and managing cash flow.

4. Working Capital Turnover:
- The working capital turnover ratio indicates how efficiently a company utilizes its working capital to generate sales.
- Lincoln Electric's working capital turnover has shown a declining trend, decreasing from 6.80 to 4.47 over the past eight quarters.
- The decreasing trend may indicate that the company is becoming less efficient in utilizing its working capital to generate revenue.

In summary, Lincoln Electric Holdings, Inc. has demonstrated efficient management of its inventory, receivables, and payables turnover ratios. However, there is a declining trend in working capital turnover, suggesting a potential inefficiency in utilizing working capital. Monitoring and addressing this trend could further improve the company's operational efficiency.

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Average number of days

Based on the activity ratios for Lincoln Electric Holdings, Inc., we can observe trends in the efficiency of the company's operations over the specified quarters:

1. Days of Inventory on Hand (DOH):
- The DOH indicates the average number of days it takes for the company to sell its inventory. A lower number is generally preferred as it indicates that inventory is moving more quickly.
- Lincoln Electric's DOH ranged from 75.36 days in Q4 2023 to 99.66 days in Q2 2022.
- The trend shows some fluctuation but overall a slight decrease, indicating that the company has been more efficient in managing its inventory in recent quarters.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect its accounts receivable. A lower DSO is favorable as it indicates quicker collection of cash.
- Lincoln Electric's DSO ranged from 46.92 days in Q4 2023 to 55.38 days in Q1 2022.
- The trend shows variability, with a recent decrease in DSO, suggesting improved efficiency in collecting receivables in the last few quarters.

3. Number of Days of Payables:
- This ratio reflects the number of days it takes for the company to pay its suppliers. A higher number indicates that the company is taking longer to pay its bills.
- Lincoln Electric's days of payables ranged from 43.57 days in Q4 2023 to 59.72 days in Q1 2022.
- The pattern shows fluctuation, with a recent decline in the number of days of payables, indicating that the company has been paying its suppliers more promptly.

In summary, Lincoln Electric Holdings, Inc. has shown improvements in managing its inventory levels efficiently, collecting receivables more promptly, and managing payables effectively in the recent quarters. These trends suggest enhanced working capital management and operational efficiency within the company.

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Long-term

The analysis of Lincoln Electric Holdings, Inc.'s long-term activity ratios reveals a consistent and strong performance in utilizing its fixed assets to generate sales. The fixed asset turnover ratio has been steadily high, ranging from 6.65 to 7.50 over the last eight quarters, indicating that the company is effectively managing its fixed assets to generate sales revenue.

Furthermore, the total asset turnover ratio, which measures how efficiently the company is using all its assets to generate sales, has also been stable, albeit slightly lower than the fixed asset turnover. The total asset turnover ratio has ranged from 1.18 to 1.39 over the same period, indicating that Lincoln Electric is efficiently utilizing its total assets to generate revenue.

Overall, the consistently high fixed asset turnover and relatively stable total asset turnover ratios suggest that Lincoln Electric Holdings, Inc. is effectively managing its assets to generate sales, which is a positive indicator of the company's operational efficiency and effectiveness in generating revenue.