Monolithic Power Systems Inc (MPWR)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	2.35	2.08	1.67	2.01	2.41
Receivables turnover	9.49	7.92	9.37	10.96	12.28
Payables turnover	9.62	12.71	12.13	6.29	9.92
Working capital turnover	1.74	1.15	1.56	1.35	1.21

Monolithic Power Systems Inc's inventory turnover has shown a decreasing trend from 2.41 in 2020 to 2.35 in 2024, indicating that the company is selling its inventory at a slightly slower pace. However, the inventory turnover remains relatively stable within the range, suggesting efficient management of inventory levels.

The receivables turnover ratio has declined from 12.28 in 2020 to 9.49 in 2024, indicating that it takes the company more time to collect its receivables. This could be a potential area for improvement as a lower turnover ratio may suggest inefficiencies in accounts receivable management.

The payables turnover ratio fluctuated over the years, with a significant decrease in 2021 followed by an increase in 2022 and 2023. This indicates changes in the company's payment terms with suppliers. The ratio of 9.62 in 2024 suggests that the company is paying its suppliers approximately 9.62 times a year, which is within a reasonable range.

The working capital turnover has shown fluctuations over the years, with a spike in 2024 to 1.74, indicating that Monolithic Power Systems Inc is generating more revenue relative to its working capital. This could be a positive sign of efficiently utilizing its resources to generate sales.

Overall, monitoring these activity ratios can provide insights into the company's operational efficiency and effectiveness in managing its resources and relationships with customers and suppliers.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	155.30	175.07	218.97	181.28	151.46
Days of sales outstanding (DSO)	days	38.45	46.07	38.95	33.31	29.72
Number of days of payables	days	37.94	28.73	30.09	58.02	36.81

Based on the provided data, we can analyze Monolithic Power Systems Inc's activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- In 2020, the company held inventory for an average of 151.46 days before selling it, indicating a moderate turnover rate.
- The DOH increased to 181.28 days in 2021, signifying a slower inventory turnover.
- By 2022, the DOH further rose to 218.97 days, indicating an even longer period of inventory holding.
- In 2023, the DOH decreased to 175.07 days, suggesting a more efficient inventory management compared to the previous year.
- The DOH improved further to 155.30 days by 2024, indicating a potentially more optimized inventory turnover process.

2. Days of Sales Outstanding (DSO):
- Monolithic Power Systems collected sales revenue, on average, in 29.72 days in 2020.
- The DSO increased to 33.31 days in 2021, indicating a slightly longer collection period.
- In 2022, the DSO further increased to 38.95 days, suggesting a slowdown in accounts receivable collections.
- By 2023, DSO extended to 46.07 days, signaling a potentially prolonged collection period.
- The DSO decreased to 38.45 days in 2024, showing a slight improvement in the collection efficiency.

3. Number of Days of Payables:
- The company took, on average, 36.81 days to pay its payables in 2020.
- The number of days of payables significantly increased to 58.02 days in 2021, indicating a considerable delay in paying suppliers.
- By 2022, the number of days of payables decreased to 30.09 days, potentially leading to improved cash flow through deferred payments.
- In 2023, the days of payables slightly decreased to 28.73 days, suggesting continued efficiency in managing payables.
- The days of payables increased to 37.94 days in 2024, indicating a slightly longer payment period compared to the previous year.

Overall, analyzing these activity ratios provides insights into Monolithic Power Systems Inc's inventory management efficiency, accounts receivable collection effectiveness, and accounts payable management practices over the years.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	4.46	4.94	5.02	3.33	3.00
Total asset turnover	0.61	0.75	0.87	0.76	0.70

Based on the provided data for Monolithic Power Systems Inc, let's analyze the long-term activity ratios, specifically the fixed asset turnover and total asset turnover, over the five-year period from 2020 to 2024.

1. Fixed Asset Turnover:
- The fixed asset turnover measures how efficiently a company generates revenue from its fixed assets. A higher ratio indicates better utilization of fixed assets.
- Monolithic Power Systems Inc's fixed asset turnover has shown an improving trend from 3.00 in 2020 to 4.46 in 2024.
- This indicates that the company has been able to generate more revenue relative to its investments in fixed assets over the years, which signifies improved efficiency in utilizing its fixed assets.

2. Total Asset Turnover:
- The total asset turnover reveals how well a company uses its total assets to generate revenue. A higher ratio implies more efficient asset utilization.
- Monolithic Power Systems Inc's total asset turnover has fluctuated over the period, from 0.70 in 2020 to 0.61 in 2024, with a peak at 0.87 in 2022.
- The decline in total asset turnover from 2022 onwards may suggest that the company's ability to generate revenue from its total assets has decreased. However, it is important to consider the industry norms and company strategy when interpreting this ratio.

In conclusion, Monolithic Power Systems Inc has shown a positive trend in its fixed asset turnover, indicating improved efficiency in utilizing fixed assets to generate revenue. However, the slight fluctuations in the total asset turnover warrant further investigation to understand the factors influencing the company's overall asset utilization efficiency.