MGP Ingredients Inc (MGPI)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 1.85 | 2.09 | 2.04 | 2.42 | 2.30 |
| Receivables turnover | 5.70 | 6.84 | 6.35 | 6.91 | 8.63 |
| Payables turnover | 8.73 | 9.12 | 9.35 | 11.27 | 10.69 |
| Working capital turnover | 2.07 | 2.23 | 2.24 | 2.33 | 2.50 |
The activity ratios of MGP Ingredients, Inc. provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.
1. Inventory Turnover: The inventory turnover ratio measures how effectively the company is managing its inventory. A decreasing trend in this ratio from 2.10 in 2020 to 1.53 in 2023 may indicate that MGP Ingredients is taking longer to sell its inventory, which could lead to increased carrying costs or potential obsolescence.
2. Receivables Turnover: The receivables turnover ratio reflects how efficiently the company is collecting payment from its customers. A decreasing trend in this ratio from 8.65 in 2019 to 5.75 in 2023 suggests that MGP Ingredients may be taking longer to collect receivables, which could impact its cash flow and liquidity.
3. Payables Turnover: The payables turnover ratio indicates how quickly the company pays its suppliers. The decreasing trend in this ratio from 9.70 in 2019 to 7.23 in 2023 may imply that MGP Ingredients is taking longer to pay its suppliers, which could affect its relationships and potential discounts for prompt payments.
4. Working Capital Turnover: The working capital turnover ratio shows how efficiently the company is using its working capital to generate sales. A decreasing trend in this ratio from 2.50 in 2019 to 2.09 in 2023 suggests that MGP Ingredients may be less effective in utilizing its working capital to support its revenue generation activities.
Overall, the declining trends in these activity ratios for MGP Ingredients, Inc. indicate potential inefficiencies in managing inventory, collecting receivables, paying suppliers, and utilizing working capital effectively. Investors and stakeholders may need to further analyze the underlying reasons behind these trends to evaluate the company's operational performance and financial health.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 197.02 | 174.57 | 178.78 | 150.81 | 158.41 |
| Days of sales outstanding (DSO) | days | 63.98 | 53.37 | 57.49 | 52.86 | 42.30 |
| Number of days of payables | days | 41.80 | 40.03 | 39.04 | 32.38 | 34.14 |
The activity ratios of MGP Ingredients, Inc. show trends over the past five years.
1. Days of Inventory on Hand (DOH):
- The DOH measures the average number of days a company holds its inventory before selling it.
- MGP's DOH has been fluctuating over the years, with an increase in 2023 compared to the previous year.
- The increase in DOH may indicate potential issues with inventory management or slower inventory turnover in 2023.
2. Days of Sales Outstanding (DSO):
- The DSO measures how long it takes for a company to collect revenue after a sale is made.
- MGP's DSO has also shown variation over the years, with an increase in 2023 compared to 2022.
- The increase in DSO could suggest challenges in collecting accounts receivable on time in 2023.
3. Number of Days of Payables:
- This ratio indicates how long a company takes to pay its suppliers.
- The number of days of payables for MGP has been relatively stable over the years, with minor fluctuations.
- The consistent number of days of payables may indicate a stable relationship with suppliers and efficient management of payables.
Overall, MGP Ingredients, Inc. should focus on optimizing inventory turnover and improving accounts receivable collection efficiency to enhance its financial performance and strengthen working capital management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.16 | 3.30 | 3.00 | 2.98 | 2.82 |
| Total asset turnover | 0.60 | 0.67 | 0.60 | 1.07 | 1.12 |
The fixed asset turnover ratio measures the efficiency of a company in generating sales from its investments in fixed assets. MGP Ingredients, Inc. has exhibited consistent performance in utilizing its fixed assets over the past five years, with the ratio ranging from 2.82 to 3.32. The fluctuations in the fixed asset turnover indicate that the company has been effectively utilizing its fixed assets to generate sales, although there may be some variation in efficiency from year to year.
On the other hand, the total asset turnover ratio reflects how well a company is generating sales from all its assets. MGP Ingredients, Inc. has experienced varying levels of total asset turnover over the same period, with the ratio fluctuating from 0.60 to 1.12. The lower total asset turnover ratios in recent years may suggest that the company's overall asset utilization has not been as efficient as it was in earlier years.
Overall, MGP Ingredients, Inc. has demonstrated a relatively strong performance in terms of fixed asset turnover, indicating effective utilization of its fixed assets to generate sales. However, the fluctuations in total asset turnover suggest that the company may need to focus on improving the efficiency of its overall asset utilization to drive sales growth and enhance profitability in the future.