Laboratory Corporation of America Holdings (LH)

Short-term

Turnover ratios

Laboratory Corporation of America Holdings has shown a consistent improvement in its inventory turnover ratio over the years, indicating that the company is more efficient in managing its inventory. The inventory turnover has increased from 21.33 in December 2020 to 19.03 in December 2024. This suggests that the company is selling its inventory more quickly.

Similarly, the receivables turnover ratio has also improved over the years, from 5.64 in December 2020 to 6.72 in December 2024. This indicates that the company is collecting its receivables more efficiently, which is a positive sign of strong cash flow management.

The payables turnover ratio reflects how quickly a company pays its suppliers. Laboratory Corporation of America Holdings has been consistent in managing its payables, with a slight increase in the turnover ratio from 14.13 in December 2020 to 10.72 in December 2024. This suggests that the company is able to negotiate favorable credit terms with its suppliers.

Lastly, the working capital turnover ratio has fluctuated over the years, with a notable increase in December 2023. A high working capital turnover ratio indicates efficient utilization of working capital to generate sales revenue. Laboratory Corporation of America Holdings' working capital turnover ratio peaked at 22.51 in December 2023, which may indicate a strong operational performance that year.

Overall, the trend in these activity ratios suggests that Laboratory Corporation of America Holdings has been effectively managing its inventory, receivables, payables, and working capital to support its operational efficiency and financial health.

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Average number of days

Laboratory Corporation of America Holdings' activity ratios provide insight into the efficiency and effectiveness of the company's operations.

1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates the number of days it takes the company to sell its inventory.
- From 2020 to 2021, the DOH decreased from 17.11 to 13.96 days, suggesting an improvement in inventory management efficiency.
- However, there was an increase in DOH in 2022 and 2023, indicating a longer time to sell inventory.
- In 2024, the DOH decreased slightly compared to the previous year, potentially due to better inventory control.

2. Days of Sales Outstanding (DSO):
- DSO reflects how quickly the company collects its accounts receivable.
- The DSO decreased from 64.75 days in 2020 to 50.89 days in 2021, indicating a faster collection of receivables.
- The DSO increased in 2022 but decreased in 2023 and 2024, showing fluctuations in the collection efficiency over the years.

3. Number of Days of Payables:
- This ratio represents the average number of days the company takes to pay its suppliers.
- The trend in days of payables shows the company’s payment behavior and cash management strategy.
- There was a decrease in the number of days of payables from 2020 to 2021, suggesting a quicker payment cycle.
- In 2022, there was a significant increase in the number of days of payables, indicating a longer time taken to settle payables, which could impact cash flow.

Overall, analyzing these activity ratios can help stakeholders understand how efficiently Laboratory Corporation of America Holdings is managing its inventory, collecting receivables, and paying its suppliers, offering valuable insights into its operational performance.

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Long-term

Based on the provided data for Laboratory Corporation of America Holdings, the analysis of the long-term activity ratios can provide valuable insights into the company's efficiency in utilizing its assets to generate revenue.

1. Fixed Asset Turnover: This ratio measures how efficiently the company is generating revenue from its fixed assets. An increasing trend in this ratio over time indicates that the company is becoming more efficient in utilizing its fixed assets. Laboratory Corporation of America Holdings saw a positive trend in the fixed asset turnover from 5.12 in December 2020 to 5.73 in December 2021, reflecting an improvement in asset utilization. However, the ratio declined to 4.25 in December 2022, 4.18 in December 2023, and then slightly recovered to 4.27 in December 2024. Despite the fluctuations, the company generally maintained a relatively high level of fixed asset turnover throughout the period, suggesting efficient operational management.

2. Total Asset Turnover: This ratio indicates how effectively the company is using all its assets to generate revenue. A higher total asset turnover ratio implies that the company is generating more sales from its assets. Laboratory Corporation of America Holdings experienced fluctuations in its total asset turnover ratio during the analyzed period. The ratio increased from 0.70 in December 2020 to 0.79 in December 2021, reflecting improved asset utilization. However, it decreased to 0.59 in December 2022, then rebounded to 0.73 in December 2023, and remained relatively stable at 0.71 in December 2024. The fluctuations in the total asset turnover ratio suggest varying levels of efficiency in generating revenue from all assets but generally indicate that the company is effectively utilizing its assets to drive sales.

Overall, the analysis of Laboratory Corporation of America Holdings' long-term activity ratios reveals that the company demonstrated efficiency in utilizing its fixed assets, as reflected by a generally increasing trend in the fixed asset turnover ratio over the years. Despite fluctuations, the total asset turnover ratio also indicates that the company effectively leveraged its total assets to generate revenue. These ratios provide important insights into the company's operational performance and efficiency in utilizing its assets to drive business activities.