Premier Inc (PINC)
Activity ratios
Short-term
Turnover ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 5.74 | 5.72 | 4.58 | 5.01 | 6.10 |
| Receivables turnover | 10.63 | 11.59 | 12.56 | 12.17 | 9.62 |
| Payables turnover | 7.59 | 8.09 | 12.28 | 10.35 | 7.89 |
| Working capital turnover | 926.61 | — | — | 26.27 | 10.63 |
Premier Inc's activity ratios provide insights into how efficiently the company manages its inventory, receivables, payables, and working capital over the past five years.
Firstly, looking at the inventory turnover ratio, which measures how effectively Premier Inc converts its inventory into sales, we observe a steady performance in recent years, with the ratio ranging from 4.58 to 6.10. This indicates that the company has been able to sell its inventory relatively well compared to its competitors.
Secondly, the receivables turnover ratio reflects how quickly Premier Inc collects payments from its customers. The trend shows a slight decrease over the years, from 12.56 in 2022 to 10.63 in 2024, indicating that the company took slightly longer to collect payments from customers in the latest year.
Thirdly, the payables turnover ratio, which measures how efficiently Premier Inc pays its suppliers, also shows a downward trend from 12.28 in 2022 to 7.59 in 2024. This implies that the company is taking longer to pay its suppliers, which could be a deliberate strategy to manage cash flow effectively.
Lastly, the working capital turnover ratio, revealing how effectively Premier Inc utilizes its working capital to generate sales, shows a significant improvement from 26.27 in 2021 to 926.61 in 2024. This substantial increase indicates a positive development in the company's ability to generate sales using its working capital efficiently.
In summary, Premier Inc has demonstrated efficiency in managing its inventory and working capital, although there have been slight declines in the turnover of receivables and payables in recent years. These trends suggest the company may need to focus on streamlining its receivables and payables processes to maintain optimal efficiency in its operations.
Average number of days
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 63.55 | 63.85 | 79.72 | 72.84 | 59.88 |
| Days of sales outstanding (DSO) | days | 34.35 | 31.50 | 29.07 | 30.00 | 37.93 |
| Number of days of payables | days | 48.07 | 45.13 | 29.73 | 35.27 | 46.25 |
The activity ratios of Premier Inc provide insights into the efficiency of its inventory management, accounts receivable collection, and accounts payable management.
1. Days of Inventory on Hand (DOH):
- Premier Inc's DOH has fluctuated over the past five years, ranging from 59.88 days in 2020 to 79.72 days in 2022.
- The decreasing trend from 2022 to 2024 indicates improved inventory turnover and more efficient management of inventory levels.
2. Days of Sales Outstanding (DSO):
- Premier Inc's DSO has also varied, with the lowest being 29.07 days in 2022 and the highest at 37.93 days in 2020.
- The decreasing trend from 2020 to 2022 suggests that the company has been more effective in collecting accounts receivable in a timely manner.
3. Number of Days of Payables:
- Premier Inc's number of days of payables has fluctuated but demonstrates a relatively stable pattern compared to inventory and accounts receivable metrics.
- The company has been extending its payables period slightly over the years, with a noticeable increase from 2022 to 2023.
Overall, Premier Inc has shown improvements in the management of its inventory and accounts receivable, which may indicate enhanced operational efficiency and liquidity. However, the slight extension of payables periods warrants further monitoring to ensure healthy supplier relationships and cash flow management.
Long-term
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 6.54 | 6.29 | 6.72 | 7.67 | 6.29 |
| Total asset turnover | 0.40 | 0.40 | 0.43 | 0.49 | 0.44 |
Long-term activity ratios, such as fixed asset turnover and total asset turnover, provide insights into how efficiently a company is utilizing its assets to generate revenue.
1. Fixed Asset Turnover:
- Premier Inc's fixed asset turnover has been relatively stable over the past five years, ranging from 6.29 to 7.67. This indicates that the company is generating $6.29 to $7.67 in revenue for every dollar invested in fixed assets.
- The increase in fixed asset turnover from 2020 to 2021 (6.29 to 7.67) suggests that the company has improved its efficiency in utilizing its fixed assets to generate sales.
- However, the slight decline in fixed asset turnover from 2021 to 2022 (7.67 to 6.72) may indicate a decrease in the efficiency of asset utilization during that period.
- Overall, Premier Inc's fixed asset turnover ratio reflects a relatively efficient use of its fixed assets to generate revenue, although some fluctuations are observed over the years.
2. Total Asset Turnover:
- Premier Inc's total asset turnover has remained relatively stable around 0.40 to 0.49 over the past five years. This indicates that the company generates $0.40 to $0.49 in revenue for every dollar invested in total assets.
- The slight fluctuations in total asset turnover suggest that the company's efficiency in utilizing all its assets to generate sales has not significantly improved or deteriorated over the years.
- While the total asset turnover ratio is on the lower side compared to some industries, it is important to consider the specific nature of Premier Inc's operations and industry dynamics when evaluating this metric.
In conclusion, the analysis of Premier Inc's long-term activity ratios indicates that the company has maintained a relatively efficient utilization of its assets to generate revenue, with some fluctuations observed in both fixed asset turnover and total asset turnover over the past five years. Further examination of the reasons behind these fluctuations and comparisons with industry benchmarks can provide additional insight into Premier Inc's asset management efficiency.