Packaging Corp of America (PKG)

Short-term

Turnover ratios

Packaging Corp Of America has shown consistent performance in managing its inventory turnover ratio over the past five years, with the ratio ranging from 6.02 to 6.71. A higher inventory turnover ratio indicates that the company is effectively managing its inventory levels and converting them into sales efficiently.

The receivables turnover ratio for the company has been relatively stable, ranging from 7.17 to 7.99 over the same period. This indicates that Packaging Corp Of America is efficient in collecting payments from its customers, with a higher turnover ratio suggesting a shorter average collection period.

In terms of payables turnover, the company has maintained a consistent performance, with the ratio ranging from 12.95 to 15.56. A higher payables turnover ratio signifies that the company is managing its payables effectively by paying its suppliers in a timely manner.

Packaging Corp Of America's working capital turnover ratio has fluctuated over the years, ranging from 3.38 to 5.19. This ratio measures how efficiently the company is utilizing its working capital to generate sales. A higher working capital turnover ratio indicates that the company is effectively utilizing its resources to generate revenue.

Overall, based on the activity ratios analyzed, Packaging Corp Of America appears to be efficiently managing its inventory, receivables, payables, and working capital, which is essential for maintaining a healthy and sustainable financial position.

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Average number of days

Packaging Corp Of America's activity ratios indicate how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH): Over the past five years, the days of inventory on hand have shown a slight increasing trend, from 54.48 days in 2019 to 60.59 days in 2023. This suggests that the company is holding inventory for a longer period of time before selling it. A higher DOH could indicate overstocking or slower inventory turnover, potentially tying up more cash in inventory.

2. Days of Sales Outstanding (DSO): The days of sales outstanding vary slightly year to year, ranging from 45.71 days in 2019 to 50.92 days in 2021. Lower DSO values reflect faster collection of receivables, indicating effective credit management. However, the increase in DSO in 2021 could suggest a delay in receiving payments from customers.

3. Number of Days of Payables: The number of days of payables has fluctuated over the years, with a range from 23.45 days in 2022 to 28.19 days in 2021. A higher number of days of payables may indicate that the company is taking longer to pay its suppliers, potentially benefiting from favorable credit terms. However, excessively extending payables could strain supplier relationships.

Overall, Packaging Corp Of America's activity ratios suggest some inefficiencies in inventory management and receivables collection. The company may need to focus on optimizing inventory levels, accelerating the collection of receivables, and managing payables effectively to improve its overall working capital management and cash flow efficiency.

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Long-term

The long-term activity ratios of Packaging Corp Of America provide insights into the company's efficiency in utilizing its fixed assets and total assets to generate revenue over the years.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how efficiently a company generates revenue from its fixed assets.
- Packaging Corp Of America's fixed asset turnover ratio has been relatively stable over the past five years, ranging from 2.02 to 2.21.
- A higher fixed asset turnover ratio indicates that the company is generating more revenue per dollar of fixed assets, reflecting greater efficiency in asset utilization.
- Despite a slight fluctuation, the company has been able to effectively utilize its fixed assets to generate revenue, although there was a slight dip in 2020 compared to 2019 and 2021.

2. Total Asset Turnover:
- The total asset turnover ratio evaluates the company's ability to generate sales from its total assets.
- Packaging Corp Of America's total asset turnover ratio has fluctuated over the last five years, ranging from 0.90 to 1.06.
- A higher total asset turnover ratio suggests that the company is generating more revenue per dollar of total assets, indicating efficient asset utilization.
- The company experienced a notable increase in total asset turnover in 2022, which may indicate improved operational efficiency or increased sales generated from total assets.
- However, the total asset turnover ratio dipped in 2023, suggesting a potential decrease in revenue generated from total assets compared to the previous year.

In summary, Packaging Corp Of America has demonstrated consistent efficiency in utilizing its fixed assets to generate revenue, as indicated by the relatively stable fixed asset turnover ratio over the years. While there have been fluctuations in the total asset turnover ratio, the company has shown varying levels of success in effectively generating sales from its total assets. Further analysis of operating and sales strategies may be warranted to understand the underlying factors driving these fluctuations in asset turnover ratios.