PriceSmart Inc (PSMT)

Working capital turnover

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Revenue	US$ in thousands	4,384,770	4,066,090	3,619,870	3,329,190	3,223,920
Total current assets	US$ in thousands	877,107	773,579	697,204	699,002	491,896
Total current liabilities	US$ in thousands	634,477	579,456	533,552	568,275	407,454
Working capital turnover		18.07	20.95	22.12	25.47	38.18

August 31, 2023 calculation

Working capital turnover = Revenue ÷ (Total current assets – Total current liabilities)
= $4,384,770K ÷ ($877,107K – $634,477K)
= 18.07

The working capital turnover ratio measures how efficiently a company is using its working capital to generate sales revenue. A higher ratio indicates better utilization of working capital.

Based on the data provided, Pricesmart Inc.'s working capital turnover has been declining over the past five years, from 38.18 in 2019 to 18.18 in 2023. This suggests a decreasing efficiency in using its working capital to generate sales.

The declining trend in the working capital turnover may indicate larger amounts of working capital being tied up in the company's operations in relation to its sales. This could be a sign of inefficiency in managing its working capital, potentially leading to reduced liquidity and profitability.

Management should closely monitor and potentially improve the management of working capital to ensure that the company's resources are utilized effectively and to maintain healthy liquidity levels. Additionally, it may be beneficial for investors and analysts to further investigate the reasons behind the declining trend and its potential impact on the company's financial performance.