Toll Brothers Inc (TOL)

Short-term

Turnover ratios

Activity ratios are key financial metrics that provide insights into how efficiently a company is managing its assets and operations. Here is a detailed analysis of Toll Brothers Inc.'s activity ratios based on the provided data:

1. Inventory turnover:
- The trend in inventory turnover shows a slight decline from Q1 2023 to Q1 2024, indicating that Toll Brothers Inc. is taking longer to sell its inventory.
- A lower inventory turnover may suggest either overstocking or difficulties in selling properties, which could tie up capital and lead to potential obsolescence or holding costs.

2. Receivables turnover:
- Toll Brothers Inc. experienced a significant increase in receivables turnover from Q4 2022 to Q1 2024, indicating that the company is collecting its receivables at a much faster rate.
- A higher receivables turnover is generally positive, as it suggests that the company is efficiently collecting payments from customers, improving its cash flow and liquidity.

3. Payables turnover:
- Payables turnover remained relatively stable over the periods, indicating that Toll Brothers Inc. is managing its payables consistently.
- A consistent payables turnover could imply that the company is effectively managing its payment obligations to suppliers and creditors without any notable changes.

4. Working capital turnover:
- The working capital turnover for Toll Brothers Inc. fluctuated over the periods but generally remained within a reasonable range.
- A higher working capital turnover indicates that the company is effectively utilizing its working capital to generate revenue. However, a significant decrease may suggest inefficiencies in managing working capital.

Overall, Toll Brothers Inc. should monitor its inventory turnover to ensure optimal management of inventory levels and work towards maintaining efficient receivables and payables turnover ratios. A consistent working capital turnover reflects stable operational efficiency, but the company should strive to improve this ratio to enhance its overall financial performance.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate revenue. Let's analyze Toll Brothers Inc.'s activity ratios based on the data provided:

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increase from Q2 2022 to Q1 2024, indicating that inventory turnover has slowed over time.
- The high number of days indicates that Toll Brothers holds inventory for a prolonged period before selling it. This may tie up capital and increase holding costs.

2. Days of Sales Outstanding (DSO):
- The DSO fluctuates over the quarters, with the lowest value in Q1 2023 and the highest in Q4 2023.
- A lower DSO signifies that Toll Brothers collects revenue from sales more quickly, improving cash flow and liquidity.

3. Number of Days of Payables:
- The trend in days of payables shows slight fluctuations over the quarters, with an increasing trend from Q2 2022 to Q1 2024.
- A longer period of payables suggests that Toll Brothers is taking longer to pay its suppliers, potentially indicating a favorable working capital position.

Overall, Toll Brothers Inc. should focus on managing its inventory efficiently to reduce DOH, improving collection efforts to lower DSO, and balancing payables effectively to optimize working capital and enhance financial performance.

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Long-term

Long-term activity ratios, namely fixed asset turnover and total asset turnover, provide insights into how efficiently Toll Brothers Inc. utilizes its assets to generate revenue.

The fixed asset turnover ratio indicates how effectively the company generates sales from its fixed assets. A higher fixed asset turnover ratio is generally preferred as it suggests that the company is utilizing its fixed assets efficiently to drive revenue. Toll Brothers Inc.'s fixed asset turnover has been consistently high, ranging from 30.17 to 36.30 over the past eight quarters. This indicates that the company is effectively utilizing its fixed assets to generate revenue, with a peak of 36.30 in Q3 2023.

The total asset turnover ratio measures the efficiency with which the company generates sales from all its assets, both fixed and current. A higher total asset turnover ratio suggests that the company is efficiently using all of its assets to generate sales. Toll Brothers Inc.'s total asset turnover has been relatively stable, fluctuating between 0.80 and 0.88 over the same period. This indicates that the company is generating a consistent level of revenue relative to its total assets.

Overall, based on the analysis of the long-term activity ratios, Toll Brothers Inc. appears to be effectively utilizing its assets to drive revenue, as evidenced by the high fixed asset turnover and stable total asset turnover ratios across the quarters.