Toll Brothers Inc (TOL)

Short-term

Turnover ratios

Inventory turnover measures the efficiency of Toll Brothers Inc in managing its inventory. A higher inventory turnover ratio indicates that the company is selling its inventory quickly, which is generally positive. Toll Brothers' inventory turnover has remained relatively stable over the past five years, ranging from 0.85 to 1.00. This suggests that the company may have consistent inventory management practices in place.

Receivables turnover ratio, which is not provided in the data, measures how efficiently the company collects payments from its customers. A higher receivables turnover ratio indicates that Toll Brothers is efficient in collecting payments from its customers.

Payables turnover ratio, also not provided in the data, measures how efficiently the company pays its suppliers. A higher payables turnover ratio typically indicates that the company is paying its suppliers quickly, which can be advantageous for maintaining good relationships with suppliers.

Working capital turnover ratio reflects how effectively Toll Brothers utilizes its working capital to generate sales revenue. A higher working capital turnover ratio suggests that the company is utilizing its resources efficiently to generate sales. Toll Brothers' working capital turnover has shown an increasing trend over the past five years, indicating improved efficiency in utilizing working capital to generate sales.

Overall, based on the provided activity ratios, Toll Brothers Inc appears to have stable inventory turnover and improving working capital turnover, which are favorable indicators of efficiency in managing its resources and generating sales.

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Average number of days

Based on the activity ratios provided for Toll Brothers Inc, the Days of Inventory on Hand (DOH) has shown a fluctuating trend over the past five years, with a peak of 428.27 days in 2020 and a decrease to 363.32 days in 2022 before increasing slightly to 399.27 days in 2024. This indicates that the company has been carrying its inventory for an extended period, which may be a sign of inefficiency in managing inventory levels.

Unfortunately, data for the Days of Sales Outstanding (DSO) and Number of Days of Payables are not available for analysis. However, these metrics are crucial in understanding how efficiently the company is collecting receivables from customers and managing its payables to suppliers.

In conclusion, it is evident that Toll Brothers Inc needs to focus on optimizing its inventory management practices to reduce the number of days inventory is held, as this could potentially improve cash flow and overall operational efficiency. Additionally, monitoring and improving DSO and payables turnover will provide a more comprehensive understanding of the company's overall effectiveness in managing its working capital cycle.

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Long-term

Toll Brothers Inc's fixed asset turnover has shown variability over the past five years, with the highest value in 2022 at 35.70 and the lowest in 2020 at 22.42. This ratio measures how efficiently the company generates sales from its fixed assets, indicating that Toll Brothers has been able to effectively utilize its fixed assets to generate revenue, particularly in 2022.

In contrast, the total asset turnover ratio has also been fluctuating but generally at a lower level compared to fixed asset turnover. The ratio has ranged from 0.64 in 2020 to 0.84 in 2022. The total asset turnover reflects the company's ability to generate sales from all of its assets, including both fixed and current assets. Toll Brothers has shown a relatively stable performance in this aspect, with a slight improvement in 2022.

Overall, while the fixed asset turnover highlights Toll Brothers' efficiency in utilizing its fixed assets for revenue generation, the total asset turnover provides a broader perspective on the company's overall asset utilization efficiency. The fluctuating trends in these ratios indicate changes in the company's asset management strategies over the years.