Travel + Leisure Co (TNL)

Short-term

Turnover ratios

The activity ratios of Travel+Leisure Co provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.

1. Inventory turnover: The inventory turnover ratio indicates how effectively the company is selling its inventory. A lower ratio may suggest slower inventory turnover, which could lead to excess inventory levels or potential obsolescence. In this case, we see a fluctuating trend in the inventory turnover ratio over the years, with a significant drop to 0.00 in 2020, indicating potential issues with managing inventory levels that year.

2. Receivables turnover: The receivables turnover ratio illustrates how efficiently the company is collecting payments from its customers. A higher ratio reflects a faster turnover of accounts receivable, indicating effective credit and collection policies. The trend suggests that Travel+Leisure Co has generally been efficient in collecting receivables over the years, with fluctuations reflecting potential changes in customer payment behavior.

3. Payables turnover: The payables turnover ratio demonstrates how quickly the company pays its suppliers. A higher ratio indicates that the company is paying its suppliers more quickly. The trend in payables turnover for Travel+Leisure Co shows variability over the years, with a notable increase in 2020. A steep drop or rise in this ratio could indicate changes in payment terms or negotiating power with suppliers.

4. Working capital turnover: The working capital turnover ratio measures how effectively the company is utilizing its working capital to generate sales. A higher ratio suggests efficient utilization of working capital. Travel+Leisure Co's working capital turnover has shown fluctuation over the years, with a relatively stable trend overall. A significant increase in this ratio may indicate improved efficiency in utilizing working capital to generate revenue.

Overall, analyzing these activity ratios can help stakeholders understand how efficiently Travel+Leisure Co is managing its inventory, receivables, payables, and working capital to support its operations and financial performance.

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Average number of days

Based on the provided data, we can analyze Travel+Leisure Co's activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- The company's Days of Inventory on Hand (DOH) shows a fluctuating trend over the past five years, ranging from a high of 245,827.50 days in 2020 to a low of 2,352.88 days in 2019. This ratio indicates the average number of days it takes for the company to sell its inventory.
- A high DOH value suggests that the company may be holding excessive inventory, which could tie up significant amounts of working capital and lead to increased storage costs.
- In contrast, a lower DOH value indicates efficient inventory management and faster inventory turnover, which can improve cash flow and profitability.

2. Days of Sales Outstanding (DSO):
- Travel+Leisure Co's Days of Sales Outstanding (DSO) has shown variability, ranging from 35.82 days in 2020 to 22.48 days in 2021. DSO represents the average number of days it takes the company to collect payment from its customers.
- A lower DSO value is generally favorable as it indicates that the company is collecting payments more quickly, improving cash flow and liquidity.
- Conversely, a higher DSO value may signal potential issues with collecting receivables promptly, leading to a higher risk of bad debts and impacting overall cash management.

3. Number of Days of Payables:
- The Number of Days of Payables for Travel+Leisure Co has also experienced fluctuations over the years, with a significant increase to 11,315.00 days in 2020 and subsequent decreases in the following years.
- This ratio measures how long the company takes to pay its suppliers. A higher number of days of payables could imply that the company is taking longer to settle its payables, potentially indicating a more favorable position for cash management.
- However, excessively extending payables for a prolonged period may strain supplier relationships and harm the company's creditworthiness.

In conclusion, analyzing these activity ratios for Travel+Leisure Co provides insights into its inventory management efficiency, accounts receivable collection effectiveness, and payment practices. Monitoring and managing these ratios can help the company optimize working capital, enhance operational performance, and maintain healthy liquidity levels.

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Long-term

Travel+Leisure Co's long-term activity ratios indicate the efficiency of the company in utilizing its assets to generate revenue over the years. The fixed asset turnover ratio has shown an increasing trend from 2019 to 2023, peaking at 5.95 in 2019 and then slightly declining to 5.73 in 2023. This suggests that the company is effectively using its fixed assets to generate sales, with higher ratios indicating better asset utilization.

On the other hand, the total asset turnover ratio has also depicted a similar pattern, steadily increasing from 0.54 in 2019 to 0.56 in 2023. This ratio indicates the company's overall ability to generate sales from all its assets, including both fixed and current assets. A higher total asset turnover ratio signifies that Travel+Leisure Co is efficiently utilizing all of its assets to generate revenue.

Overall, the increasing trends in both fixed asset turnover and total asset turnover ratios indicate that Travel+Leisure Co has been improving its efficiency in generating sales relative to its asset base over the years, which is a positive sign of operational effectiveness and asset utilization.