Parsons Corp (PSN)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | — | — | 2,909.33 | 1,081.91 | 317.96 |
| Receivables turnover | 4.56 | 4.46 | 4.75 | 4.39 | 4.41 |
| Payables turnover | 21.52 | 20.59 | 18.90 | 17.29 | 18.62 |
| Working capital turnover | 7.46 | 6.83 | 6.05 | 5.95 | 10.29 |
Activity ratios provide insights into how effectively a company manages its resources and operations. Let's analyze the activity ratios of Parsons Corp based on the provided data:
1. Inventory Turnover:
- The inventory turnover ratio measures how quickly a company sells its inventory. The significant increase in inventory turnover from 2019 to 2021 indicates that Parsons Corp has improved its inventory management efficiency substantially.
- The lack of data for 2020 and 2023 makes it challenging to assess recent trends.
2. Receivables Turnover:
- The receivables turnover ratio reflects how efficiently a company collects its accounts receivable. Parsons Corp has maintained a relatively stable receivables turnover ratio over the years, indicating a consistent collection process.
- The slight fluctuations suggest the company is effectively managing its credit sales and collecting outstanding payments.
3. Payables Turnover:
- The payables turnover ratio measures how efficiently a company pays its suppliers. Parsons Corp has shown an increasing trend in payables turnover, indicating that the company is taking longer to pay its suppliers, which could be a favorable strategy to manage cash flow.
- A higher payables turnover ratio could suggest strong negotiating power with suppliers or efficient working capital management.
4. Working Capital Turnover:
- The working capital turnover ratio evaluates the efficiency of using working capital to generate revenue. Parsons Corp has shown fluctuations in working capital turnover over the years, with a peak in 2019 and a subsequent decline before increasing again in 2023.
- The company's ability to generate revenue from its working capital has shown variability, which may indicate changes in operational efficiency or business strategy.
In conclusion, Parsons Corp has demonstrated improvements in inventory management efficiency and stable collection processes. The increasing payables turnover suggests a deliberate strategy in managing supplier payments. The fluctuations in working capital turnover highlight the need for further analysis to understand the underlying factors affecting the company's operational efficiency.
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 | — | — | 0.13 | 0.34 | 1.15 |
| Days of sales outstanding (DSO) | days | 80.09 | 81.83 | 76.76 | 83.12 | 82.69 |
| Number of days of payables | days | 16.96 | 17.73 | 19.31 | 21.11 | 19.60 |
Activity ratios such as Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables provide insights into how efficiently a company manages its inventory, accounts receivable, and accounts payable, respectively.
- Days of Inventory on Hand (DOH): This ratio indicates how many days, on average, it takes for the company to sell its inventory. A decreasing trend in DOH over the years from 1.15 days in 2019 to 0.13 days in 2021 suggests that Parsons Corp has been managing its inventory more efficiently.
- Days of Sales Outstanding (DSO): DSO measures the average number of days it takes for the company to collect payments from its customers. The DSO increased from 76.76 days in 2021 to 81.83 days in 2022 before decreasing to 80.09 days in 2023. Overall, there has been fluctuation in this ratio, indicating potential challenges in managing accounts receivable efficiently.
- Number of Days of Payables: This ratio represents the average number of days the company takes to pay its suppliers. The trend of decreasing payables days from 19.60 days in 2019 to 16.96 days in 2023 suggests that Parsons Corp has been paying its suppliers more promptly over the years.
Overall, while the company has improved its inventory management efficiency and reduced its payment period to suppliers, there seems to be some challenges in managing accounts receivable efficiently, as reflected by the variable trend in DSO. The company may need to focus on streamlining its accounts receivable processes to improve cash flow and overall working capital management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 54.75 | 42.20 | 34.95 | 32.25 | 32.02 |
| Total asset turnover | 1.13 | 0.99 | 0.95 | 0.99 | 1.14 |
The fixed asset turnover ratio for Parsons Corp has been consistently increasing over the past five years, indicating that the company is generating more revenue from its fixed assets. This can be attributed to improved efficiency in utilizing its long-term assets to generate sales.
On the other hand, the total asset turnover ratio has fluctuated over the years, with a slight increase in 2023 compared to the previous year, but lower than the ratios in 2019 and 2020. This indicates that the company's efficiency in generating sales from all of its assets has varied, possibly due to changes in business operations or asset utilization.
Overall, the increasing trend in fixed asset turnover is a positive sign of improved efficiency in utilizing long-term assets, while the fluctuations in total asset turnover suggest that there may be areas for improvement in managing the company's overall asset base to generate sales.