Power Integrations Inc (POWI)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 1.32 | 2.10 | 3.45 | 2.38 | 2.29 |
| Receivables turnover | 30.29 | 31.25 | 16.99 | 13.60 | 17.33 |
| Payables turnover | 8.17 | 9.45 | 7.84 | 7.05 | 7.56 |
| Working capital turnover | 0.96 | 1.40 | 1.14 | 0.91 | 0.86 |
The activity ratios of Power Integrations Inc. provide insights into how efficiently the company manages its assets and liabilities to generate revenue.
1. Inventory turnover: The inventory turnover ratio indicates how many times a company sells and replaces its inventory during a specific period. Power Integrations Inc.'s inventory turnover has been decreasing over the past five years, from 3.45 in 2021 to 1.32 in 2023. This may suggest that the company is managing its inventory less efficiently, potentially leading to increased carrying costs or obsolete inventory.
2. Receivables turnover: The receivables turnover ratio shows how quickly a company collects payments from its customers. Power Integrations Inc. has maintained a high receivables turnover ratio over the years, indicating that the company has been effective in collecting payments from customers promptly.
3. Payables turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Power Integrations Inc.'s payables turnover has fluctuated slightly but remained relatively stable over the years. A higher payables turnover ratio may suggest that the company is efficiently managing its payables and effectively using trade credit from suppliers.
4. Working capital turnover: The working capital turnover ratio reveals how effectively a company utilizes its working capital to generate sales. Power Integrations Inc.'s working capital turnover has shown some variability but has generally improved over the years. A higher working capital turnover ratio indicates that the company is efficient in utilizing its working capital to generate revenue.
In summary, Power Integrations Inc. has shown varying levels of efficiency in managing its inventory, receivables, payables, and working capital over the past five years. Maintaining a balance between these activity ratios is crucial for the company to optimize its operations and financial performance.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 276.25 | 173.90 | 105.74 | 153.44 | 159.16 |
| Days of sales outstanding (DSO) | days | 12.05 | 11.68 | 21.48 | 26.84 | 21.06 |
| Number of days of payables | days | 44.68 | 38.64 | 46.57 | 51.77 | 48.31 |
The activity ratios provide insights into how efficiently Power Integrations Inc. manages its inventory, accounts receivable, and accounts payable.
1. Days of Inventory on Hand (DOH):
- The DOH has been increasing over the years, indicating that Power Integrations is holding onto its inventory for longer periods before selling it.
- This could be due to various reasons such as changing demand patterns, production delays, or overstocking.
- It is important for the company to monitor its inventory levels closely to avoid obsolescence and carrying costs.
2. Days of Sales Outstanding (DSO):
- The DSO has fluctuated over the years but generally indicates that Power Integrations collects its accounts receivable relatively quickly.
- A lower DSO signifies efficient management of accounts receivable and timely cash collection from customers.
- The decrease in DSO from 2021 to 2022 is a positive trend, indicating improved efficiency in collecting receivables.
3. Number of Days of Payables:
- The number of days of payables also shows fluctuation but has generally decreased over the years.
- This implies that Power Integrations is taking longer to pay its suppliers, which could suggest improved bargaining power or cash flow management.
- However, excessively delaying payments can strain supplier relationships and affect future credit terms.
Overall, Power Integrations should aim to strike a balance between managing its inventory effectively, collecting receivables promptly, and maintaining good relationships with its suppliers to optimize its working capital and operational efficiency. Monitoring these activity ratios regularly can help the company identify areas for improvement and make informed decisions to enhance its financial performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.71 | 3.69 | 3.91 | 2.94 | 3.61 |
| Total asset turnover | 0.54 | 0.78 | 0.69 | 0.54 | 0.52 |
The fixed asset turnover ratio for Power Integrations Inc. has experienced fluctuations over the past five years, indicating the efficiency with which the company generates sales revenue from its investments in fixed assets. In 2023, the ratio decreased to 2.71 from 3.69 in 2022, suggesting a decline in the productivity of fixed assets in generating sales. However, the ratio still remains relatively high compared to the earlier years, indicating that the company is effectively utilizing its fixed assets to generate revenue.
On the other hand, the total asset turnover ratio, which reflects the company's ability to generate sales from its total assets, has also shown variability in recent years. In 2023, the total asset turnover ratio decreased to 0.54 from 0.78 in 2022, indicating a lower level of efficiency in utilizing its total assets to generate revenue. Despite the decrease, the ratio is in line with historical trends and remains relatively consistent over the years.
Overall, the analysis of Power Integrations Inc.'s long-term activity ratios reveals some fluctuations in the efficiency of utilizing both fixed assets and total assets to generate sales revenue. The company should continue to monitor and assess its asset utilization to ensure optimal efficiency and productivity in driving revenue growth.