SkyWest Inc (SKYW)

Short-term

Turnover ratios

Based on the activity ratios provided for SkyWest Inc, we can draw several key insights:

1. Inventory Turnover: The inventory turnover ratio measures how efficiently the company manages its inventory. A higher ratio indicates better inventory management. From December 31, 2020, to December 31, 2024, the inventory turnover ratio decreased from 32.09 to around 10. This suggests that the company took longer to sell its inventory in later years, which could indicate issues with sales or production.

2. Receivables Turnover: The receivables turnover ratio reflects how quickly the company collects payments from its customers. A higher ratio is generally favorable. SkyWest Inc's receivables turnover decreased from 58.93 on December 31, 2020, to around 30 on December 31, 2024. This decline may indicate potential difficulties in collecting payments from customers, which could impact the company's cash flow.

3. Payables Turnover: The payables turnover ratio indicates how quickly the company pays its suppliers. A higher ratio suggests efficient management of payables. SkyWest Inc's payables turnover decreased significantly from 10.5 on December 31, 2020, to 2.11 on December 31, 2021, and then fluctuated in subsequent years. A lower payables turnover could suggest challenges in paying suppliers promptly.

4. Working Capital Turnover: The working capital turnover ratio shows how effectively the company utilizes its working capital to generate revenue. A higher ratio indicates better utilization of working capital. SkyWest Inc had a working capital turnover ratio of 49.49 on December 31, 2020, and it was not reported for the following years. A lack of data for the subsequent years makes it challenging to assess the trend in working capital efficiency.

In summary, the activity ratios for SkyWest Inc show mixed performance in inventory, receivables, payables, and working capital management over the years. It is important for the company to analyze these ratios further to identify areas for improvement and optimize its operational efficiency.

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Average number of days

SkyWest Inc's activity ratios provide insights into how efficiently the company manages its inventory, collects its receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The DOH ratio measures how many days, on average, inventory is held before being sold.
- SkyWest Inc's DOH has increased significantly from 11.37 days in 2020 to around 34-36 days in the following years (2022-2024).
- This suggests that the company is holding onto inventory for a longer period, which may indicate slower inventory turnover or potential issues with inventory management.

2. Days of Sales Outstanding (DSO):
- The DSO ratio represents the average number of days it takes for the company to collect payment from its customers.
- SkyWest Inc's DSO has also increased over the years, from 6.19 days in 2020 to around 10-12 days in 2023-2024.
- A higher DSO could imply that the company is facing challenges in collecting receivables promptly or that it is extending credit terms to customers.

3. Number of Days of Payables:
- The number of days of payables indicates how long the company takes to pay its suppliers.
- SkyWest Inc's data shows a significant increase in days of payables from 34.75 days in 2020 to 173.22 days in 2021, and then gradually decreasing to around 115-130 days in subsequent years.
- A very high number of days of payables, as seen in 2021, may indicate liquidity issues or strained relationships with suppliers, while the decreasing trend in later years suggests improvement in payables management.

In summary, the analysis of SkyWest Inc's activity ratios suggests that the company has been facing challenges in managing inventory, collecting receivables, and paying suppliers efficiently. Monitoring and improving these ratios are crucial for enhancing operational effectiveness and financial performance.

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Long-term

SkyWest Inc's long-term activity ratios indicate the efficiency of the company in utilizing its fixed assets and total assets to generate revenue.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio has increased steadily over the years, from 0.38 in 2020 to 0.65 in 2024. This suggests that SkyWest Inc has been able to generate more revenue per dollar of fixed assets invested.
- An increasing fixed asset turnover ratio signifies improved efficiency in utilizing fixed assets such as aircraft or infrastructure to generate sales.

2. Total Asset Turnover:
- Similarly, the total asset turnover ratio has also shown a consistent increase from 0.30 in 2020 to 0.51 in 2024. This indicates that the company has become more efficient in generating revenue relative to its total assets.
- The upward trend in total asset turnover implies that SkyWest Inc has been managing its assets effectively to drive sales growth and improve overall operational efficiency.

In conclusion, the increasing trend in both fixed asset turnover and total asset turnover ratios suggests that SkyWest Inc has been successful in enhancing its asset utilization efficiency over the years, which is a positive indication of the company's operational performance and financial health.