Callaway Golf Company (MODG)

Short-term

Turnover ratios

The activity ratios of Callaway Golf Company provide insights into the efficiency of its operations.

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company manages its inventory.
- Callaway's inventory turnover has fluctuated over the years, decreasing from 4.93 in 2020 to 1.09 in 2022 before showing a notable improvement to 3.39 in 2024.
- A lower inventory turnover may indicate overstocking, while a higher ratio suggests efficient inventory management.

2. Receivables Turnover:
- Receivables turnover reflects how quickly a company collects its receivables from customers.
- Callaway shows a positive trend in receivables turnover, increasing from 11.15 in 2020 to 22.77 in 2024.
- A higher receivables turnover ratio implies effective credit policies and timely collection of payments.

3. Payables Turnover:
- The payables turnover ratio reveals how quickly a company pays its suppliers.
- Callaway's payables turnover has varied, with a significant drop from 26.22 in 2020 to 6.36 in 2021, before recovering to 26.65 in 2024.
- A lower payables turnover may suggest an extended payment period, while a higher ratio indicates prompt payment to suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how efficiently a company utilizes its working capital to generate sales.
- Callaway's working capital turnover has shown fluctuations, peaking at 11.32 in 2022 but declining to 5.50 in 2024.
- A higher working capital turnover ratio indicates effective utilization of resources to drive sales growth.

In conclusion, while Callaway Golf Company has experienced some fluctuations in its activity ratios over the years, the overall trend shows improvements in managing inventory, collecting receivables, and paying suppliers efficiently. These ratios provide valuable insights into the company's operational efficiency and effectiveness in utilizing its resources to generate revenue.

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Average number of days

The activity ratios of Callaway Golf Company over the years demonstrate significant fluctuations in operational efficiency.

1. Days of Inventory on Hand (DOH):
- The DOH ratio indicates the average number of days it takes for the company to sell its inventory.
- Callaway Golf Company's DOH has varied notably over the period analyzed, from a low of 74.04 days in 2020 to a high of 334.81 days in 2022.
- A decreasing DOH is generally preferred as it signifies quicker inventory turnover and potentially more efficient operations. However, the spike in 2022 and subsequent decrease in 2024 indicate potential challenges in managing inventory effectively.

2. Days of Sales Outstanding (DSO):
- The DSO ratio measures how long it takes for the company to collect its accounts receivable.
- Callaway Golf Company has shown relatively stable DSO figures, ranging from 14.94 days in 2021 to 18.44 days in 2023.
- A lower DSO is favorable as it indicates a faster collection of receivables and improved cash flow. The company's consistent performance in this metric suggests efficient credit and collection practices.

3. Number of Days of Payables:
- This ratio represents the average time it takes for the company to pay its suppliers.
- Callaway Golf Company's days of payables have fluctuated significantly, with a peak of 57.37 days in 2021 and a low of 13.69 days in 2024.
- A longer period of payables may imply better cash flow management, but it could also strain supplier relationships. The company's varying payables days indicate potential shifts in supplier payment strategies over the years.

In summary, while Callaway Golf Company has demonstrated some stability in its DSO, its inventory turnover and payables management show more volatility. Further analysis and consideration of industry benchmarks will be necessary to fully assess the company's operational efficiency and financial health.

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Long-term

The fixed asset turnover ratio for Callaway Golf Company has shown a decreasing trend over the years, declining from 10.59 in 2020 to 1.92 in 2024. This decline indicates that the company generated less revenue relative to its investment in fixed assets during this period.

On the other hand, the total asset turnover ratio also saw a decrease from 0.78 in 2020 to 0.56 in 2024. This ratio signifies how efficiently the company is utilizing all its assets to generate sales. The decreasing trend in the total asset turnover ratio suggests a relative decrease in sales generated per dollar of total assets employed by the company over the years.

Overall, the decreasing trend in both the fixed asset turnover and total asset turnover ratios may indicate inefficiencies in asset utilization and revenue generation for Callaway Golf Company during the period under review. Further analysis would be needed to understand the underlying causes of these deteriorating efficiency ratios and to recommend potential strategies to improve them.