Southern Company (SO)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 0.56 | 0.80 | 0.75 | 0.69 | 0.79 |
| Receivables turnover | 10.18 | 14.16 | 13.38 | 12.46 | 13.69 |
| Payables turnover | 0.65 | 0.60 | 0.81 | 0.74 | 0.89 |
| Working capital turnover | — | — | — | — | — |
The inventory turnover ratio for Southern Company has shown some fluctuations over the past five years, ranging from a low of 2.04 in 2020 to a high of 4.42 in 2022. This ratio indicates the number of times inventory is sold and replaced within a specific period. A higher inventory turnover is generally favorable as it suggests efficient management of inventory levels.
The receivables turnover ratio has also varied over the years, with a peak of 7.88 in 2022 and a low of 6.11 in 2020. This ratio reflects how efficiently the company is collecting on its credit sales. A higher receivables turnover ratio suggests that the company is collecting cash from its customers more quickly.
The payables turnover ratio has shown some fluctuations as well, with a high of 3.36 in 2022 and a low of 2.19 in 2020. This ratio evaluates how well the company manages its trade credit from suppliers. A higher payables turnover ratio indicates that the company is paying its suppliers quickly, which could impact relationships with suppliers.
The working capital turnover ratio data appears to be missing for all years, which limits our ability to assess how effectively the company is utilizing its working capital to generate sales revenue. This ratio typically measures how efficiently a company is using its working capital to support its sales activities.
Overall, the analysis of Southern Company's activity ratios reveals fluctuations in inventory turnover, receivables turnover, and payables turnover over the past five years. This analysis provides insights into the company's operational efficiency and management of inventory, receivables, and payables.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 647.34 | 458.73 | 487.29 | 528.59 | 461.42 |
| Days of sales outstanding (DSO) | days | 35.86 | 25.77 | 27.29 | 29.29 | 26.67 |
| Number of days of payables | days | 559.67 | 604.05 | 448.80 | 491.20 | 408.67 |
Days of inventory on hand (DOH) measures how many days, on average, the company holds its inventory before selling it. In the context of Southern Company, we observe fluctuations in DOH over the past five years, with significant increases in 2020 and 2023. A higher DOH indicates that the company is taking longer to sell its inventory, potentially tying up more capital in unsold goods.
Days of sales outstanding (DSO) shows the average number of days it takes for the company to collect revenue after making a sale. Southern Company's DSO has remained relatively stable over the period, indicating that the company has been consistent in collecting revenue within a reasonable timeframe.
Number of days of payables reflects how long the company takes to pay its suppliers after receiving goods or services. Southern Company's payables days have shown variability, with a notable increase in 2020 and 2023. A longer payment period can suggest the company is using its suppliers as a source of short-term financing.
Overall, analyzing these activity ratios together can provide insights into Southern Company's operational efficiency, management of inventory, collection of receivables, and management of payables.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 0.25 | 0.31 | 0.25 | 0.23 | 0.26 |
| Total asset turnover | 0.18 | 0.22 | 0.18 | 0.17 | 0.18 |
The fixed asset turnover ratio for Southern Company has shown a fluctuating trend over the past five years, declining from 0.26 in 2019 to 0.25 in 2023. This indicates that the company generated $0.25 in revenue for every dollar invested in fixed assets in 2023. The decrease in this ratio suggests that the company may be utilizing its fixed assets less efficiently to generate sales.
Similarly, the total asset turnover ratio has also experienced a downward trend, falling from 0.18 in 2019 to 0.18 in 2023. This ratio signifies the company's ability to generate revenue from all its assets, including fixed and current assets. The consistent low total asset turnover ratio suggests that Southern Company has not been able to efficiently utilize its total assets to generate sales over the years.
Overall, the declining trends in both fixed asset turnover and total asset turnover ratios indicate that Southern Company may be facing challenges in efficiently utilizing its assets to generate revenue. Further analysis and strategies may be required to improve asset efficiency and enhance financial performance.