Lennox International Inc (LII)

Short-term

Turnover ratios

Inventory turnover is a measure of how efficiently a company manages its inventory. Lennox International Inc's inventory turnover has been relatively consistent over the past five years, ranging from 4.56 to 5.88. A higher inventory turnover indicates that the company is selling its inventory more quickly, which is generally favorable.

Receivables turnover measures how quickly a company collects cash from its credit sales. Lennox International Inc's receivables turnover has also been relatively stable, ranging from 7.75 to 8.38. A higher receivables turnover indicates that the company is efficiently collecting cash from its customers.

Payables turnover measures how quickly a company pays its suppliers. Lennox International Inc's payables turnover has fluctuated over the years, with a significant increase in 2023. A higher payables turnover may suggest that the company is paying its suppliers more quickly.

Working capital turnover measures how efficiently a company is using its working capital to generate sales. Lennox International Inc's working capital turnover has shown variations over the years, with a notable increase in 2021. A higher working capital turnover indicates that the company is using its working capital effectively to generate revenue.

Overall, Lennox International Inc's activity ratios reflect a generally efficient management of inventory, receivables, payables, and working capital over the past five years, with some fluctuations in payables turnover.

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Average number of days

Lennox International Inc's activity ratios provide insight into the efficiency of the company's operations.

1. Days of Inventory on Hand (DOH):
- The company's inventory turnover has been relatively stable over the years, with an average of approximately 70 days.
- The increase in DOH from 2020 to 2022 indicates that Lennox International Inc may be carrying more inventory or facing challenges in managing its inventory levels efficiently.
- The decrease in DOH from 2022 to 2024 suggests that the company has taken steps to improve inventory management and reduce excess inventory.

2. Days of Sales Outstanding (DSO):
- Lennox International Inc's DSO has been fairly consistent, averaging around 45 days.
- The company's ability to collect receivables in a timely manner is indicated by the stable DSO.
- The decrease in DSO from 2022 to 2023 indicates improved efficiency in collecting receivables, while the slight increase in 2024 may be a signal for the need for further monitoring.

3. Number of Days of Payables:
- Lennox International Inc's payables days have fluctuated over the years, with an average of approximately 46 days.
- A decrease in the number of days of payables from 2022 to 2023 suggests that the company is paying its suppliers more quickly, which can impact cash flow and liquidity management.
- The increase in payables days in 2024 may indicate a shift towards more favorable payment terms with suppliers, potentially improving cash conversion cycle efficiency.

Overall, analyzing these activity ratios can help in evaluating Lennox International Inc's operational efficiency, inventory management, receivables collection effectiveness, and management of payables.

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Long-term

Long-term activity ratios provide insights into how efficiently a company is utilizing its assets to generate sales revenue. Two key ratios for evaluating long-term activity are Fixed Asset Turnover and Total Asset Turnover.

- Fixed Asset Turnover: This ratio measures how effectively a company is using its fixed assets to generate sales. A higher ratio indicates that the company is generating more sales from its fixed assets. Lennox International Inc's Fixed Asset Turnover has shown a generally increasing trend from 2020 to 2022, peaking at 8.60 in 2022, which signifies improved efficiency in utilizing its fixed assets. However, there was a slight decline in 2023 and 2024, possibly indicating some challenges in maximizing sales from fixed assets during those years.

- Total Asset Turnover: This ratio evaluates the company's ability to generate sales from all its assets, both fixed and current. A higher Total Asset Turnover ratio suggests that the company is efficiently using all its assets to generate revenue. Lennox International Inc's Total Asset Turnover ratio has fluctuated over the years, ranging from 1.54 in 2024 to 1.93 in 2021. The decreasing trend from 2021 to 2024 may indicate that the company faced challenges in leveraging its total assets to generate sales revenue efficiently.

In conclusion, while Lennox International Inc has demonstrated improvements in utilizing its fixed assets to generate sales revenue based on the Fixed Asset Turnover ratio, the fluctuating trend in the Total Asset Turnover ratio suggests the need for further analysis to identify opportunities for enhancing overall asset efficiency and revenue generation.