Regal Beloit Corporation (RRX)

Short-term

Turnover ratios

Regal Rexnord Corp’s activity ratios provide insights into how efficiently the company manages its assets and liabilities to generate sales.

1. Inventory turnover: This ratio indicates how many times a company's inventory is sold and replaced over a specific period. Regal Rexnord Corp's inventory turnover has been steadily increasing over the quarters, reaching 3.28 in Q4 2023. This implies that the company is selling its inventory more rapidly, which can help minimize holding costs and potential obsolescence.

2. Receivables turnover: This ratio shows how many times a company collects its accounts receivables within a period. Regal Rexnord Corp's receivables turnover has been relatively stable, ranging between 5.00 and 6.78. A higher turnover signifies quicker collection of receivables, indicating effective credit management and liquidity.

3. Payables turnover: The payables turnover ratio reflects how efficiently a company pays its suppliers. Regal Rexnord Corp's payables turnover has also been consistent, ranging from 5.25 to 7.61. A higher turnover suggests that the company is paying its suppliers promptly, potentially benefiting from favorable credit terms.

4. Working capital turnover: This ratio demonstrates how effectively a company utilizes its working capital to generate revenue. Regal Rexnord Corp's working capital turnover has shown a slight upward trend, indicating that the company is efficiently utilizing its current assets to generate sales. A higher turnover typically signifies better liquidity management and operational efficiency.

Overall, Regal Rexnord Corp's activity ratios suggest that the company is effectively managing its inventory, receivables, payables, and working capital to drive sales and enhance operational efficiency.

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Average number of days

Regal Rexnord Corp's activity ratios provide insight into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The trend in Regal Rexnord Corp's Days of Inventory on Hand (DOH) indicates an improvement in inventory management efficiency over the past two quarters. The company reduced its DOH from 180.80 days in Q1 2023 to 111.17 days in Q4 2023.
- Regal Rexnord Corp's current inventory management practices appear to be more effective compared to the previous year, as the DOH has consistently decreased from Q1 2022 to Q4 2023. This suggests that the company may be optimizing its inventory levels to avoid excessive holding costs and potential obsolescence.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding (DSO) metric reflects Regal Rexnord Corp's ability to collect payments from customers in a timely manner. The DSO has shown some fluctuation but has remained relatively stable over the past year, with a decrease from 72.97 days in Q1 2023 to 53.82 days in Q4 2023.
- This improvement in DSO may indicate efficient credit management practices or a strong customer base with prompt payment behaviors. Regal Rexnord Corp's ability to reduce its DSO suggests a positive trend in receivables management efficiency.

3. Number of Days of Payables:
- Regal Rexnord Corp's Number of Days of Payables represents the average number of days it takes the company to pay its suppliers. The trend shows an increase in the number of days of payables from 77.19 days in Q1 2022 to 47.93 days in Q4 2023.
- A decreasing trend in the Number of Days of Payables indicates that the company is taking longer to pay its suppliers, which can have implications for its relationships and negotiating power with vendors. However, the recent increase in days of payables may suggest that Regal Rexnord Corp is managing its cash flow more effectively or negotiating more favorable payment terms.

Overall, based on the activity ratios analysis, Regal Rexnord Corp appears to be making positive strides in managing its inventory, collecting receivables, and paying suppliers efficiently, which can contribute to overall financial health and sustainability.

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Long-term

Regal Rexnord Corp's long-term activity ratios indicate the efficiency of the company in utilizing its fixed assets and total assets to generate sales. The fixed asset turnover ratio has been fluctuating over the quarters, with a notable decrease from Q4 2022 to Q1 2023, showing that the company was generating $6 of sales for every $1 invested in fixed assets and then decreased to $4.23 by Q1 2023. This trend suggests that Regal Rexnord Corp may have experienced challenges in efficiently utilizing its fixed assets during this period.

On the other hand, the total asset turnover ratio also displayed a declining trend from Q4 2022 to Q1 2023, falling from 0.51 to 0.31, indicating that the company generated $0.31 of sales for every $1 of total assets in Q1 2023. This decrease in total asset turnover may indicate inefficiencies in utilizing both fixed and current assets to generate revenue.

Overall, the decreasing trends in both fixed asset and total asset turnover ratios suggest that Regal Rexnord Corp may need to focus on improving the efficiency of its asset utilization to increase sales and profitability in the long term.