PriceSmart Inc (PSMT)

Short-term

Turnover ratios

The activity ratios of PriceSmart Inc provide insight into how efficiently the company manages its inventory, receivables, payables, and working capital over the past five years.

1. Inventory Turnover: PriceSmart's inventory turnover has been relatively stable over the years, ranging from 1.10 to 1.25, except for a significant decrease in 2020 to 10.36. This implies that the company is holding onto its inventory for a longer period in 2020 but has since improved efficiency in managing its inventory.

2. Receivables Turnover: The receivables turnover ratio has shown a fluctuating trend, with a peak in 2022 at 303.64 and the lowest turnover in 2020 at 253.11. This suggests that PriceSmart has been effective in collecting its accounts receivable quickly over the years, with a notable improvement in 2022.

3. Payables Turnover: The payables turnover ratio has been consistent around 1.25, indicating that PriceSmart maintains a stable payment cycle to its suppliers. The sudden increase to 8.59 in 2020 could be due to a change in payment terms or business strategies.

4. Working Capital Turnover: PriceSmart's working capital turnover has shown an increasing trend over the years, reaching 32.16 in 2024 from 25.47 in 2020. This indicates that the company is generating sales revenue efficiently relative to its working capital investment.

Overall, PriceSmart Inc has demonstrated efficient management of its inventory, receivables, payables, and working capital over the past five years, with improvements in certain areas such as inventory management and working capital turnover.

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Average number of days

The Days of Inventory on Hand (DOH) for PriceSmart Inc has shown an increasing trend over the past five years, from 35.22 days in 2020 to 309.82 days in 2024. This indicates that the company is now holding inventory for a longer period before it is sold, which could tie up capital and lead to potential obsolescence risks.

In contrast, the Days of Sales Outstanding (DSO) has fluctuated slightly over the same period, with a minor decrease from 1.44 days in 2020 to 1.41 days in 2024. This suggests that PriceSmart is efficient in collecting payments from its customers in a timely manner.

The Number of Days of Payables also increased significantly over the five-year period, from 42.47 days in 2020 to 284.78 days in 2024. This indicates that the company is taking longer to pay its suppliers, potentially straining relationships with vendors and impacting cash flow.

Overall, the activity ratios suggest that PriceSmart Inc may need to focus on managing its inventory more effectively to improve working capital and liquidity, as well as maintaining healthy relationships with suppliers to ensure timely payments.

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Long-term

The fixed asset turnover ratio for PriceSmart Inc has been relatively stable over the past five years, ranging from 4.81 to 5.37. This indicates that the company generates a consistent amount of revenue for each dollar invested in fixed assets. The increasing trend in fixed asset turnover suggests an improvement in the efficiency of utilizing fixed assets to generate sales.

On the other hand, the total asset turnover ratio has also shown a generally increasing trend, from 2.01 to 2.42 over the same period. This indicates that PriceSmart Inc has been more effective in generating sales from its total assets. A higher total asset turnover ratio suggests that the company is efficiently utilizing all its assets to generate revenue.

Overall, based on the analysis of both fixed asset turnover and total asset turnover ratios, PriceSmart Inc has been effectively utilizing its assets to generate revenue over the past five years. The increasing trends in both ratios indicate improved efficiency in asset utilization, which is a positive indicator of the company's operational performance.