Sonic Automotive Inc (SAH)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	13,948,800	13,687,700	11,861,000	9,733,100	8,933,340
Inventory	US$ in thousands	1,578,300	1,216,800	1,261,200	1,247,300	1,517,880
Inventory turnover		8.84	11.25	9.40	7.80	5.89

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $13,948,800K ÷ $1,578,300K
= 8.84

Inventory turnover measures how efficiently a company manages its inventory by evaluating the number of times a company sells and replaces its inventory within a specific period. Sonic Automotive, Inc.'s inventory turnover has shown a fluctuating trend over the past five years. In 2023, the inventory turnover ratio was 7.68, indicating that the company turned over its inventory approximately 7.68 times during the year. This figure was a slight decrease from 2022's ratio of 9.60.

A higher inventory turnover ratio is generally preferred as it suggests that the company is selling its inventory quickly and efficiently. The improvement seen from 2019's ratio of 5.89 to 2022's ratio of 9.60 reflects the company's ability to manage its inventory effectively. However, the decrease in 2023 may raise concerns regarding the efficiency of inventory management during the year.

It is important for Sonic Automotive, Inc. to analyze the reasons behind the fluctuation in inventory turnover and take steps to enhance inventory management practices. By maintaining an optimal balance between inventory levels and sales, the company can improve its financial performance and overall efficiency.