Otter Tail Corporation (OTTR)

Short-term

Turnover ratios

The activity ratios of Otter Tail Corporation provide insight into the efficiency of the company's operations in managing its resources.

1. Inventory turnover: The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a period. Otter Tail Corporation's inventory turnover has shown a declining trend from Q1 2022 to Q4 2023, indicating that the company is holding onto inventory for a longer period before selling it.

2. Receivables turnover: This ratio reflects how efficiently a company is collecting on its credit sales. Otter Tail Corporation's receivables turnover has fluctuated over the quarters, showing a general trend of volatility. A higher turnover implies that the company is collecting on outstanding receivables more quickly.

3. Payables turnover: The payables turnover ratio demonstrates how quickly a company is paying its suppliers. Otter Tail Corporation's payables turnover has varied throughout the quarters, suggesting some inconsistency in payment practices. A higher ratio indicates that the company is paying its suppliers more quickly.

4. Working capital turnover: This ratio measures how efficiently a company is utilizing its working capital to generate sales. Otter Tail Corporation's working capital turnover has shown significant fluctuations, notably in Q1 2022, where it spiked to a notably high level. A higher turnover ratio implies that the company is effectively using its working capital to support its operations.

In conclusion, Otter Tail Corporation's activity ratios indicate mixed efficiency levels in managing its inventory, receivables, payables, and working capital. Analyzing these ratios over time can help identify operational trends and areas for potential improvement in the company's overall performance.

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Average number of days

The analysis of Otter Tail Corporation's activity ratios reveals the following trends:

1. Days of Inventory on Hand (DOH):
- The DOH has shown a slight increasing trend over the past eight quarters, from 65.39 days in Q1 2022 to 92.18 days in Q4 2023.
- This indicates that Otter Tail Corporation has been holding onto inventory for a longer period, which may suggest inefficiencies in managing inventory levels or slower inventory turnover.

2. Days of Sales Outstanding (DSO):
- The DSO has fluctuated over the quarters but shows a general increase from 36.09 days in Q4 2022 to 42.51 days in Q4 2023.
- This indicates that the collection of receivables from customers is taking longer, which could potentially impact the company's cash flow and liquidity.

3. Number of Days of Payables:
- The number of days of payables has varied over the quarters, with peaks and troughs observed. It increased from 53.80 days in Q4 2022 to 58.15 days in Q4 2023.
- This suggests that Otter Tail Corporation is taking longer to pay its suppliers, which can be a strategy to manage cash flow and working capital.

Overall, the analysis of these activity ratios indicates that Otter Tail Corporation may need to focus on optimizing its inventory management, improving accounts receivable collection processes, and balancing payment terms with suppliers to enhance working capital efficiency and overall operational performance.

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Long-term

Long-term activity ratios provide insights into how efficiently Otter Tail Corporation is utilizing its long-term assets to generate revenue. From the data provided in the table, we can analyze the fixed asset turnover and total asset turnover ratios.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how effectively the company is using its fixed assets to generate sales. It is calculated by dividing net sales by average fixed assets.
- Otter Tail Corporation's fixed asset turnover has been declining slightly over the quarters, from 0.66 in Q4 2022 to 0.56 in Q4 2023. This trend suggests that the company may be less efficient in utilizing its fixed assets to generate revenue.
- A fixed asset turnover ratio of less than 1 indicates that Otter Tail Corporation is generating less revenue for each dollar invested in fixed assets. The decrease in this ratio warrants further investigation into the company's asset management strategies.

2. Total Asset Turnover:
- The total asset turnover ratio measures how effectively Otter Tail Corporation is utilizing all its assets to generate sales. It is calculated by dividing net sales by average total assets.
- Similar to the fixed asset turnover ratio, the total asset turnover ratio has also been decreasing gradually, from 0.50 in Q4 2022 to 0.42 in Q4 2023. This decline suggests that the company may be becoming less efficient in generating sales given its total asset base.
- A total asset turnover ratio of less than 1 implies that the company is generating less revenue for each dollar invested in total assets. The decreasing trend in this ratio indicates a potential inefficiency in asset utilization, which might impact the company's profitability and overall financial performance.

In conclusion, the declining trend in both the fixed asset turnover and total asset turnover ratios for Otter Tail Corporation raises concerns regarding the company's efficiency in utilizing its long-term assets to drive sales. Further analysis and management attention may be necessary to improve asset utilization and overall operational effectiveness.