Patrick Industries Inc (PATK)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its assets and liabilities to generate sales. Here is a detailed analysis of Patrick Industries, Inc.'s activity ratios based on the provided data:

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a given period.
- Patrick Industries' inventory turnover has shown a decreasing trend over the past five years, from 7.54 in 2019 to 5.26 in 2023.
- A lower inventory turnover may indicate overstocking or slower sales, which can tie up capital and lead to potential obsolescence.

2. Receivables Turnover:
- Receivables turnover reflects how effectively a company collects its accounts receivable from customers.
- Patrick Industries has experienced fluctuations in its receivables turnover, with a peak at 26.35 in 2022 and a low of 17.89 in 2020.
- A higher receivables turnover indicates that the company is efficiently collecting payments from its customers, improving cash flow.

3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers for credit purchases.
- Patrick Industries' payables turnover has varied over the years, with spikes in 2022 and 2020.
- A higher payables turnover may suggest that the company is managing its payables well, potentially benefiting from favorable credit terms.

4. Working Capital Turnover:
- The working capital turnover ratio indicates how effectively a company utilizes its working capital to generate revenue.
- Patrick Industries has maintained a relatively stable working capital turnover, ranging from 7.08 in 2019 to 9.00 in 2022.
- A higher working capital turnover signifies efficient use of resources to support the company's operations and sales activities.

In summary, analyzing Patrick Industries' activity ratios reveals fluctuations in inventory turnover, receivables turnover, and payables turnover over the years, reflecting changes in the company's operational efficiency and financial management practices. The working capital turnover has been relatively consistent, indicating stable utilization of working capital to drive revenue generation.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets, collects receivables, and pays its liabilities. Let's analyze Patrick Industries, Inc.'s activity ratios based on the provided data.

1. Days of Inventory on Hand (DOH):
- The Days of Inventory on Hand measures how many days, on average, the company holds its inventory before selling it.
- Patrick Industries' DOH has been increasing over the past five years, indicating that the company is holding onto its inventory for longer periods.
- The increase in DOH could suggest potential issues such as slowing sales, overstocking, or inefficiencies in inventory management.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding ratio shows how many days, on average, it takes for the company to collect its accounts receivable.
- Patrick Industries' DSO has fluctuated over the years, with a general trend of variability.
- A lower DSO is preferable as it indicates faster collection of receivables, potentially improving cash flow and liquidity.

3. Number of Days of Payables:
- The Number of Days of Payables ratio highlights how many days, on average, the company takes to pay its suppliers.
- Patrick Industries' payables period has also varied, but generally, the company takes a shorter period to pay its suppliers.
- A shorter payables period can indicate good relationships with suppliers but may also suggest a need for efficient working capital management.

In summary, Patrick Industries, Inc. should focus on optimizing its inventory management to reduce the holding period, aim for consistency in collecting receivables to improve cash flow, and strike a balance in paying suppliers timely while maintaining good relationships. A comprehensive analysis of these activity ratios can provide valuable insights into the company's operational efficiency and working capital management.

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Long-term

The long-term activity ratios of Patrick Industries, Inc. indicate the efficiency with which the company is utilizing its fixed assets and total assets over a period of five years.

1. Fixed Asset Turnover:

- The fixed asset turnover ratio measures how efficiently a company is generating revenues from its investment in fixed assets. A higher ratio suggests better utilization of fixed assets to generate sales.
- Patrick Industries' fixed asset turnover has shown fluctuations over the five-year period, ranging from a low of 9.81 in 2023 to a high of 13.93 in 2022.
- The decreasing trend in the fixed asset turnover ratio from 2022 to 2023 may suggest a potential decline in the efficiency of utilizing fixed assets to generate sales.
- Despite the fluctuations, the ratios generally indicate that the company is effectively utilizing its fixed assets to generate revenue, with ratios consistently above 1.0 indicating that each dollar invested in fixed assets is generating multiple dollars in sales.

2. Total Asset Turnover:

- The total asset turnover ratio measures how well a company is using its total assets to generate revenue. A higher ratio indicates more efficient utilization of assets to generate sales.
- Patrick Industries' total asset turnover ratio has also displayed variability over the five-year period, with a low of 1.35 in 2023 and a high of 1.75 in 2022.
- The declining trend in the total asset turnover ratio from 2022 to 2023 may suggest a decrease in the efficiency of the company in generating sales relative to its total asset base.
- Generally, the total asset turnover ratios indicate that Patrick Industries has been effectively utilizing its total assets to generate revenue, with ratios consistently above 1.0 showing that the company is generating more in sales than the value of its total assets.

In conclusion, the analysis of the long-term activity ratios of Patrick Industries, Inc. highlights the company's efficiency in generating sales from its fixed assets and total assets. While the fluctuating trends in these ratios may indicate some potential challenges in asset utilization in certain years, the overall performance suggests that the company has been efficiently utilizing its assets to generate revenue over the five-year period.