Lennox International Inc (LII)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its resources and generating sales.

1. Inventory Turnover:
Lennox International Inc's inventory turnover has been relatively stable over the past five years, ranging from 4.56 to 5.88. A higher inventory turnover indicates that the company is selling goods more quickly, which is generally positive as it reduces the risk of obsolescence and holding costs.

2. Receivables Turnover:
The receivables turnover ratio measures how quickly a company collects its accounts receivable. Lennox International Inc's receivables turnover has shown a consistent increase from 7.97 in 2019 to 8.38 in 2023. A higher turnover ratio suggests that the company has efficient credit policies and timely collection practices.

3. Payables Turnover:
The payables turnover ratio indicates how quickly a company pays its suppliers. Lennox International Inc's payables turnover ratio has been increasing over the years, reaching 9.16 in 2023. A higher payables turnover ratio may imply that the company is managing its payables effectively, possibly taking advantage of discounts or optimizing cash flow.

4. Working Capital Turnover:
The working capital turnover ratio reflects how effectively a company is utilizing its working capital to generate sales. Lennox International Inc's working capital turnover has varied significantly over the years, with a notable decline from 32.21 in 2019 to 11.89 in 2023. A higher turnover ratio is generally preferred as it indicates efficient utilization of working capital to support sales activities.

In conclusion, Lennox International Inc has demonstrated efficiency in managing its inventory, receivables, and payables over the years, with improvements in receivables and payables turnover ratios. However, the working capital turnover has fluctuated, suggesting varying levels of efficiency in utilizing working capital to support sales. Monitoring these activity ratios can help assess the company's operational performance and identify areas for improvement in efficiency and working capital management.

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Average number of days

The activity ratios of Lennox International Inc provide insight into the efficiency of the company's operations in managing inventory, collecting receivables, and paying payables.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows fluctuations over the years, ranging from a low of 61.83 days in 2020 to a high of 80.04 days in 2022. This indicates that Lennox International has varied in its ability to manage its inventory efficiently.
- The decrease in DOH from 80.04 days in 2022 to 74.31 days in 2023 is a positive sign, suggesting the company may have improved its inventory management practices.

2. Days of Sales Outstanding (DSO):
- The DSO figures have been relatively consistent over the years, ranging from 43.56 days to 47.07 days. This stability implies that Lennox International has been effective in collecting receivables from its customers in a timely manner.
- A lower DSO value is preferred as it indicates quicker cash conversion from sales, and the company has shown a slight improvement from 47.07 days in 2022 to 43.56 days in 2023.

3. Number of Days of Payables:
- Lennox International's days of payables have fluctuated over the years, with values ranging from 39.83 days to 49.84 days. This indicates variability in the company's payment practices to suppliers.
- The decrease in days of payables from 45.42 days in 2022 to 39.83 days in 2023 could suggest that the company is now taking less time to pay its bills, which could impact its working capital management.

In summary, while Lennox International Inc has shown improvements in its inventory management and days of payables in 2023, the stability in its days of sales outstanding indicates effective receivables management. Continuous monitoring and potential improvements in inventory and payables turnover could further enhance the company's operational efficiency and financial performance.

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Long-term

The long-term activity ratios for Lennox International Inc over the past five years reflect the efficiency with which the company utilizes its fixed assets and total assets to generate revenue.

The fixed asset turnover ratio has shown a declining trend from 2019 to 2023, indicating that Lennox International is generating less revenue for each dollar invested in fixed assets. However, the ratio remains relatively high, suggesting that the company continues to efficiently utilize its fixed assets to generate sales.

On the other hand, the total asset turnover ratio has fluctuated slightly over the same period, with a peak in 2021. This ratio measures the company's ability to generate sales from all its assets, including both fixed and current assets. Despite the fluctuations, the trend suggests that Lennox International has been effective in generating revenue from its total asset base.

Overall, while the fixed asset turnover ratio has decreased slightly over the years, the total asset turnover ratio has remained relatively stable, indicating that Lennox International has maintained a reasonable level of efficiency in utilizing its assets to generate sales.