Super Micro Computer Inc (SMCI)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Inventory turnover	4.04	2.84	2.90	3.30	4.48
Receivables turnover	6.20	6.16	7.53	8.10	8.60
Payables turnover	7.52	6.71	4.94	6.74	8.34
Working capital turnover	3.95	3.89	3.96	3.77	4.29

Sure, I can help with that. Activity ratios provide insight into how effectively a company is managing its assets and liabilities to generate sales and cash flows. Here's an analysis of each activity ratio for Super Micro Computer Inc based on the provided data:

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company manages its inventory. A higher ratio implies better efficiency.
- Super Micro Computer Inc's inventory turnover has shown a fluctuating trend over the past five years, with a value of 4.04 in 2023, compared to 2.84 in 2022. This increase indicates that the company has improved its management of inventory in the most recent year.
- An increase in inventory turnover could be a positive sign, suggesting better sales management or inventory optimization strategies. It could also indicate that the company is carrying less excess inventory.

2. Receivables Turnover:
- The receivables turnover ratio measures how efficiently a company collects cash from its customers. A higher ratio usually signifies better efficiency.
- Super Micro Computer Inc's receivables turnover has also fluctuated over the past five years, with a value of 6.20 in 2023, compared to 5.34 in 2022. This indicates a slight improvement in the collection of receivables in the most recent year.
- An increase in the receivables turnover ratio suggests that the company is collecting cash from its customers more quickly, which could be a positive sign for its cash flow and liquidity.

3. Payables Turnover:
- The payables turnover ratio measures how efficiently a company manages its accounts payable. A higher ratio generally indicates that the company is paying its suppliers more quickly.
- Super Micro Computer Inc's payables turnover has shown some fluctuation, with a value of 7.52 in 2023, compared to 6.71 in 2022. This increase suggests that the company has improved its management of accounts payable in the most recent year.
- An increase in payables turnover could indicate that the company is taking longer to pay its suppliers, which could have implications for its relationships with vendors and suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio measures the efficiency of a company in using its working capital to generate sales.
- Super Micro Computer Inc's working capital turnover ratio has fluctuated over the past five years, with a value of 3.95 in 2023, higher than the previous year. This indicates that the company has effectively utilized its working capital to generate sales in the latest year.
- An increase in working capital turnover suggests that the company is generating more sales using its working capital, which could indicate improved operational efficiency.

In summary, Super Micro Computer Inc has shown some fluctuations in its activity ratios over the past five years. The most recent data for inventory turnover, receivables turnover, payables turnover, and working capital turnover suggest some improvement in the efficiency of the company's operations and management of its assets and liabilities. However, these ratios should be analyzed in conjunction with other financial metrics and industry benchmarks for a more comprehensive assessment of the company's performance.

Average number of days

		Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Days of inventory on hand (DOH)	days	90.34	128.33	125.69	110.48	81.41
Days of sales outstanding (DSO)	days	58.84	59.21	48.48	45.08	42.45
Number of days of payables	days	48.55	54.42	73.94	54.19	43.79

Days of Inventory on Hand (DOH):
Super Micro Computer Inc's days of inventory on hand have decreased slightly from 128.33 days in 2022 to 90.34 days in 2023. This indicates that the company is managing its inventory more efficiently, which could result in lower carrying costs and potential reductions in obsolete inventory.

Days of Sales Outstanding (DSO):
The days of sales outstanding for Super Micro Computer Inc have shown an increasing trend, rising from 49.71 days in 2019 to 58.84 days in 2023. This suggests that the company is taking longer to collect its accounts receivable, potentially impacting cash flow. It may be prudent for the company to review its credit policies and collection procedures to ensure prompt receipt of payments.

Number of Days of Payables:
Super Micro Computer Inc's number of days of payables has fluctuated over the years, with a slight decrease from 54.42 days in 2022 to 48.55 days in 2023. A lower number of days of payables can indicate more prompt payment to suppliers, which may strengthen relationships but could also impact cash flow.

Overall, while the company has made some improvements in managing its inventory, there is a need to address the increasing trend in days of sales outstanding to ensure efficient cash flow management. Additionally, the fluctuating number of days of payables may require further attention to maintain effective relationships with suppliers while managing cash flow.

Long-term

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Fixed asset turnover	24.54	18.17	12.95	14.28	16.88
Total asset turnover	1.94	1.62	1.59	1.74	2.08

The long-term activity ratios provide insights into how efficiently Super Micro Computer Inc is utilizing its fixed and total assets to generate sales over the years. I will analyze the fixed asset turnover and total asset turnover ratios for the five years of data provided.

Fixed Asset Turnover:
The fixed asset turnover ratio measures how effectively the company is using its fixed assets to generate revenue. A higher ratio indicates efficient use of fixed assets.

- In Jun 30, 2023, the fixed asset turnover ratio significantly increased to 24.54 from 18.17 in Jun 30, 2022, indicating that Super Micro Computer Inc generated $24.54 in sales for every dollar invested in fixed assets. This suggests a substantial improvement in the efficiency of utilizing fixed assets.
- Prior to 2023, the ratio showed a fluctuating trend, reaching its lowest at 12.95 in Jun 30, 2021, and then gradually increasing in the following years.
- Despite the fluctuation, the company has generally shown a strong ability to generate sales from its fixed assets over the period.

Total Asset Turnover:
The total asset turnover ratio measures the company's ability to generate sales from its total assets, including both fixed and current assets. A higher ratio indicates more efficient use of assets to generate sales.

- The total asset turnover ratio has also shown fluctuations over the years, with a slight increase from 1.62 in Jun 30, 2022, to 1.94 in Jun 30, 2023. This suggests that the company generated $1.94 in sales for every dollar of total assets in 2023.
- The ratio reached its lowest point at 1.59 in Jun 30, 2021, and then fluctuated slightly in the subsequent years.

Analysis:
Overall, the trend in both fixed asset turnover and total asset turnover ratios indicates variability in the efficiency of asset utilization by Super Micro Computer Inc. The significant increase in the fixed asset turnover ratio in 2023 signifies improved efficiency in generating sales from fixed assets. However, the fluctuating trend in the total asset turnover ratio suggests that the company's ability to generate sales from its total assets has varied over the years.

It is important for the company to continue monitoring these ratios to ensure a consistent and efficient use of assets in driving sales growth while maintaining profitability. Further analysis of underlying factors contributing to these fluctuations can provide valuable insights into the company's operational efficiency and asset management strategies.