Liquidity Services Inc (LQDT)

Short-term

Turnover ratios

Activity ratios provide insights into a company's operational efficiency and effectiveness in managing its assets and liabilities. Based on the activity ratios of Liquidity Services Inc from 2020 to 2024, here is a detailed analysis:

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company manages its inventory. Liquidity Services Inc has shown fluctuations in its inventory turnover ratio over the five-year period, ranging from 14.19 to 29.00.
- A higher inventory turnover ratio indicates that the company is selling its inventory quickly, which can be seen in the significant increase from 2021 to 2022, followed by a decline in 2023 and 2024. This may imply changes in demand, supply chain disruptions, or inventory management practices.

2. Receivables Turnover:
- The receivables turnover ratio reflects how efficiently a company is collecting on its credit sales. Liquidity Services Inc's receivables turnover ratio has also fluctuated over the years, ranging from 23.78 to 43.99.
- The increasing trend from 2020 to 2023 suggests improvements in the company's credit policies or collection efforts. However, the decrease in 2024 may indicate a potential slowdown in receivables collection efficiency.

3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers. Liquidity Services Inc's payables turnover ratio has fluctuated between 4.36 and 7.40 over the period.
- A lower payables turnover ratio may indicate that the company is taking longer to pay its suppliers, potentially benefiting from more favorable credit terms. The fluctuations in this ratio may reflect changes in the company's vendor relationships or payment terms.

4. Working Capital Turnover:
- The working capital turnover ratio shows how efficiently a company utilizes its working capital to generate sales. Liquidity Services Inc's working capital turnover ratio has varied from 8.33 to 46.04.
- A higher working capital turnover ratio indicates a more efficient use of working capital to drive sales. The significant spike in 2022 suggests a robust utilization of working capital, possibly due to changes in the company's operating cycle or business strategies.

In summary, Liquidity Services Inc's activity ratios demonstrate fluctuations over the years, indicating changes in operational efficiency and management practices. The company's inventory turnover, receivables turnover, payables turnover, and working capital turnover ratios offer insights into its inventory management, accounts receivable collection, vendor payment practices, and working capital utilization. Further analysis and contextual understanding are necessary to interpret the implications of these fluctuations accurately.

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Average number of days

Liquidity Services Inc has shown trends in its activity ratios over the past five years. The Days of Inventory on Hand (DOH) indicate the average number of days it takes for the company to sell its inventory. In 2024, the DOH increased to 23.20 days from 18.14 days in 2023, which suggests a longer time for the company to turn over its inventory compared to the previous year. The increasing trend in DOH over the years may indicate potential issues with inventory management efficiency.

The Days of Sales Outstanding (DSO) represent the average number of days it takes for the company to collect its accounts receivable. The DSO increased from 9.02 days in 2023 to 11.40 days in 2024, indicating a longer collection period for sales. While a higher DSO may suggest potential liquidity issues, it may also be due to offering extended credit terms to customers.

The Number of Days of Payables indicates the average number of days it takes for the company to pay its suppliers. Liquidity Services Inc's days of payables increased to 79.63 days in 2024 from 63.82 days in 2023, showing an extended period before settling its payables. A longer payment period may indicate a benefit of preserving cash or negotiating favorable terms with suppliers but could potentially strain supplier relationships if not managed effectively.

Overall, the trends in activity ratios for Liquidity Services Inc suggest changes in inventory management, accounts receivable collection, and accounts payable practices over the years. It is essential for the company to closely monitor and manage these ratios to ensure operational efficiency and maintain healthy liquidity and working capital levels.

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Long-term

The fixed asset turnover ratio of Liquidity Services Inc has shown a consistent increasing trend over the past five years, indicating that the company is generating more sales revenue relative to its investment in fixed assets. This implies better utilization of fixed assets to generate revenue and reflects operational efficiency.

On the other hand, the total asset turnover ratio has been fluctuating over the same period, with a slight decrease from 2022 to 2024. The ratio indicates the company's ability to generate sales revenue relative to its total assets. While the ratio is above 1 in all years, suggesting that assets are being effectively utilized to generate revenue, the decreasing trend may indicate a slight decline in asset efficiency.

Overall, the increase in fixed asset turnover ratio reflects improved efficiency in utilizing fixed assets, while the fluctuation in total asset turnover ratio suggests the need for monitoring and potentially improving overall asset management.