Toro Co (TTC)
Activity ratios
Short-term
Turnover ratios
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.82 | 3.78 | 4.69 | 4.56 | 4.34 |
| Receivables turnover | 11.03 | 13.46 | 12.67 | 12.82 | 11.57 |
| Payables turnover | 9.67 | 6.87 | 6.89 | 8.17 | 8.87 |
| Working capital turnover | 5.29 | 7.32 | 7.12 | 5.85 | 8.50 |
The activity ratios for Toro Co. provide insights into the efficiency of the company's management of its inventory, receivables, payables, and working capital. Let's analyze each ratio in detail.
1. Inventory Turnover:
The inventory turnover ratio indicates how effectively Toro Co. is managing its inventory. The company's inventory turnover has shown a declining trend over the last five years, from 3.21 in 2019 to 2.74 in 2023. This indicates that the company is selling its inventory at a slower rate, which could potentially lead to higher carrying costs or obsolete inventory.
2. Receivables Turnover:
The receivables turnover ratio measures the efficiency of Toro Co.'s credit policies and collection efforts. The company's receivables turnover has fluctuated over the last five years. Despite the variability, the trend shows an overall decrease from 13.57 in 2022 to 11.18 in 2023. This suggests that Toro Co. is collecting its receivables at a slower pace, which may indicate a lengthening of the average collection period and potential issues with customer credit.
3. Payables Turnover:
The payables turnover ratio assesses how efficiently Toro Co. is managing its accounts payable. The company's payables turnover has been inconsistent but has trended upward, increasing from 5.20 in 2022 to 6.92 in 2023. This indicates that the company is taking longer to pay its suppliers, which could either be a deliberate strategy to manage cash flow or a result of deteriorating vendor relationships.
4. Working Capital Turnover:
The working capital turnover ratio measures how efficiently the company is using its working capital to generate sales. Toro Co.'s working capital turnover has shown a decreasing trend, from 8.58 in 2019 to 5.36 in 2023. A lower working capital turnover may indicate that the company is not efficiently utilizing its short-term assets to support sales growth.
In summary, the analysis of Toro Co.'s activity ratios suggests that the company may be facing challenges related to inventory management, receivables collection, and working capital utilization. These trends could potentially impact the company's cash flow, profitability, and overall financial performance, and merit further investigation and corrective actions by management.
Average number of days
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 95.49 | 96.57 | 77.76 | 80.13 | 84.01 |
| Days of sales outstanding (DSO) | days | 33.09 | 27.11 | 28.81 | 28.47 | 31.54 |
| Number of days of payables | days | 37.74 | 53.17 | 53.00 | 44.70 | 41.15 |
Days of inventory on hand (DOH) measures the number of days it takes for a company to sell its entire inventory. A higher DOH indicates that the company is carrying excess inventory, which may lead to higher storage costs and obsolete inventory. Toro Co.'s DOH has been increasing over the past five years, reaching 133.43 days in 2023, which suggests that the company's inventory management has become less efficient.
Days of sales outstanding (DSO) measures the average number of days it takes for a company to collect revenue after a sale has been made. A higher DSO indicates that the company is taking longer to collect its accounts receivable, which may signal potential issues with customer credit and collection policies. Toro Co.'s DSO has fluctuated over the past five years, with a substantial increase to 32.66 days in 2023. This increase suggests that the company's collection process may be slowing down, impacting its cash flow and working capital.
The number of days of payables indicates the average number of days it takes for a company to pay its suppliers. A higher number of days of payables may indicate that the company is taking advantage of longer payment terms from suppliers, which can benefit cash flow. Toro Co.'s number of days of payables has also fluctuated over the past five years, with a significant decrease to 52.75 days in 2023. This decrease suggests that the company has been paying its suppliers more quickly, which could impact its cash flow and working capital.
Overall, the trend in Toro Co.'s activity ratios over the past five years indicates potential issues with inventory management and accounts receivable collection, which may impact the company's efficiency and cash flow.
Long-term
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 7.00 | 7.83 | 8.06 | 7.15 | 7.11 |
| Total asset turnover | 1.23 | 1.26 | 1.34 | 1.17 | 1.33 |
The long-term activity ratios provide insights into how efficiently Toro Co. is utilizing its long-term assets to generate sales. Let's analyze the two ratios based on the provided data.
1. Fixed Asset Turnover:
Fixed asset turnover measures how efficiently the company is using its fixed assets to generate sales. A higher ratio indicates better utilization of fixed assets. Toro Co.'s fixed asset turnover has been relatively stable over the past five years, ranging from 7.10 to 8.12. This suggests that the company has been consistently efficient in generating sales from its fixed assets. The slight fluctuations in the ratio could be attributed to changes in the composition of fixed assets or fluctuations in sales volumes.
2. Total Asset Turnover:
Total asset turnover measures the efficiency of the company in generating sales from all its assets, both fixed and current. A higher ratio indicates better overall asset utilization. In the case of Toro Co., the total asset turnover ratio has shown some variability over the past five years, ranging from 1.18 to 1.35. This indicates fluctuations in the company's ability to generate sales relative to its total asset base. It's worth noting that there was a dip in 2020 followed by a recovery in 2021, and the ratio has remained relatively stable since then.
In conclusion, Toro Co. has demonstrated consistent efficiency in utilizing its fixed assets to generate sales, as evidenced by the relatively stable fixed asset turnover ratios. However, the company's overall asset turnover has shown some variability, which may warrant further investigation into the factors influencing the fluctuations. Overall, the company appears to be effectively leveraging its long-term assets to drive sales, though continued monitoring of asset turnover efficiency is prudent.