Reliance Steel & Aluminum Co (RS)

Short-term

Turnover ratios

Reliance Steel & Aluminum Co.'s activity ratios provide insights into the efficiency with which the company manages its assets and liabilities.

1. Inventory Turnover: The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a period. Reliance Steel & Aluminum Co. saw a fluctuation in its inventory turnover over the past five years, with a peak in 2022 at 5.90 and a slight decline to 5.02 in 2023. This indicates that the company is effectively managing its inventory levels to meet demand.

2. Receivables Turnover: The receivables turnover ratio reflects how efficiently a company is collecting payments from its customers. Reliance Steel & Aluminum Co. maintained a relatively stable receivables turnover ratio over the years, with a slight decrease from 10.63 in 2022 to 9.82 in 2023. This suggests that the company is efficient in collecting payments from its customers.

3. Payables Turnover: The payables turnover ratio assesses how quickly a company pays its suppliers. Reliance Steel & Aluminum Co. improved its payables turnover ratio from 2020 to 2023, indicating that the company is managing its payables effectively by paying suppliers more rapidly in recent years.

4. Working Capital Turnover: The working capital turnover ratio compares net sales to working capital, reflecting how efficiently a company is utilizing its working capital to generate revenue. Reliance Steel & Aluminum Co. experienced fluctuations in its working capital turnover ratio over the past five years, with a peak in 2022 at 4.85 and a decrease to 3.77 in 2023. This indicates that the company's ability to generate revenue from its working capital has varied over the years.

Overall, Reliance Steel & Aluminum Co.'s activity ratios suggest that the company has generally been effective in managing its assets and liabilities to support its operations and generate revenue, although some fluctuations in certain ratios indicate areas where further improvements may be beneficial.

---

Average number of days

Reliance Steel & Aluminum Co.'s activity ratios provide insights into the efficiency of the company's inventory management, accounts receivable collection, and accounts payable management.

1. Days of Inventory on Hand (DOH):
- Reliance Steel & Aluminum Co. experienced an increase in its days of inventory on hand from 61.86 days in 2022 to 72.70 days in 2023.
- The company's inventory turnover has slowed down, indicating that inventory is sitting on the shelves for a longer period before being sold.
- This slowdown may suggest potential issues with managing inventory levels efficiently, leading to higher carrying costs and potential obsolescence risks.

2. Days of Sales Outstanding (DSO):
- The DSO ratio for Reliance Steel & Aluminum Co. shows an increase from 34.35 days in 2022 to 37.18 days in 2023.
- This increase suggests that customers are taking longer to pay their invoices, which could impact the company's cash flow and working capital management.
- Reliance Steel & Aluminum Co. may need to reassess its credit policies and collections procedures to shorten the collection period and improve cash inflows.

3. Number of Days of Payables:
- The number of days of payables for Reliance Steel & Aluminum Co. increased from 12.78 days in 2022 to 14.60 days in 2023.
- This indicates that the company is taking longer to pay its suppliers, potentially improving its cash conversion cycle.
- However, extending payment terms excessively could strain relationships with suppliers and affect future purchasing terms.

Overall, improvements in managing inventory levels, accelerating receivables collection, and optimizing payable terms could enhance the company's working capital efficiency and overall financial performance.

---

Long-term

Reliance Steel & Aluminum Co.'s long-term activity ratios show how efficiently the company is utilizing its assets to generate sales over the years. The fixed asset turnover ratio indicates that, on average, the company generated approximately $6.59 in sales for every dollar invested in fixed assets in 2023. This ratio has decreased from the previous year but remains at a relatively high level, suggesting effective utilization of fixed assets.

The total asset turnover ratio indicates that the company generated approximately $1.41 in sales for every dollar invested in total assets in 2023. This ratio has also decreased from the previous year but remains above 1, indicating that the company is generating revenue efficiently in relation to its total asset base.

Overall, the trend in both fixed asset turnover and total asset turnover ratios shows fluctuation over the years, but the company has maintained relatively strong efficiency in asset utilization. It is important for the company to continue monitoring these ratios to ensure optimal efficiency in managing its assets and generating sales.