Walgreens Boots Alliance Inc (WBA)

Activity ratios

Short-term

Turnover ratios

	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Inventory turnover	18.14	16.11	15.96	17.92	14.24
Receivables turnover	26.10	26.50	23.29	19.49	18.84
Payables turnover	11.86	11.96	11.69	13.98	9.27
Working capital turnover	—	—	—	—	—

To analyze the activity ratios of Walgreens Boots Alliance Inc, we'll examine the inventory turnover, receivables turnover, payables turnover, and working capital turnover. Let's interpret each ratio in detail based on the data provided.

1. Inventory Turnover:
The inventory turnover ratio indicates how efficiently Walgreens Boots Alliance Inc manages its inventory. The increase in inventory turnover from 11.44 in 2019 to 13.57 in 2023 is a positive sign, reflecting that the company is selling its inventory at a faster rate. This suggests effective inventory management, reducing the risk of obsolete or excess inventory.

2. Receivables Turnover:
The receivables turnover ratio measures how efficiently the company collects on credit sales. The increasing trend in receivables turnover from 18.94 in 2019 to 25.85 in 2023 demonstrates that Walgreens Boots Alliance Inc is collecting its receivables more quickly, indicating an improvement in its credit and collection policies.

3. Payables Turnover:
The payables turnover ratio reflects how quickly the company pays its suppliers. The decreasing trend in payables turnover from 7.45 in 2019 to 8.86 in 2023 suggests that Walgreens Boots Alliance Inc is taking longer to pay its suppliers. While this may indicate a potential strain on working capital, it could also imply improved negotiation terms with suppliers.

4. Working Capital Turnover:
Unfortunately, the data does not include the working capital turnover ratio for Walgreens Boots Alliance Inc across the years, possibly indicating that this information was not available or not applicable.

Overall, the activity ratios demonstrate that Walgreens Boots Alliance Inc has been efficiently managing its inventory and collecting receivables. However, the decreasing payables turnover raises the concern that the company might be taking longer to pay its suppliers, potentially impacting working capital management.

Average number of days

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Days of inventory on hand (DOH)	days	20.12	22.66	22.87	20.37	25.63
Days of sales outstanding (DSO)	days	13.98	13.77	15.67	18.73	19.37
Number of days of payables	days	30.78	30.53	31.21	26.10	39.39

To analyze Walgreens Boots Alliance Inc's activity ratios, we will focus on the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables. These ratios provide insights into the efficiency of the company's inventory management and accounts receivable and payable processes.

Days of Inventory on Hand (DOH):
The DOH ratio indicates the average number of days it takes for the company to sell its inventory. A lower DOH is generally favorable as it suggests that the company is efficiently managing its inventory. Over the past five years, Walgreens Boots Alliance Inc's DOH has shown a decreasing trend from 2019 to 2023, falling from 31.90 days to 26.91 days. This indicates an improvement in inventory management efficiency, which could be a result of better demand forecasting, inventory control, or supply chain optimization.

Days of Sales Outstanding (DSO):
The DSO ratio measures the average number of days it takes for the company to collect payment after making a sale. A lower DSO is preferable as it indicates faster collection of receivables. Walgreens Boots Alliance Inc's DSO has fluctuated over the past five years, with a slight increase in 2023 compared to 2022. The company's DSO was 14.12 days in 2023, indicating a relatively efficient accounts receivable management, albeit with a slight increase compared to the previous year.

Number of Days of Payables:
This ratio represents the average number of days it takes for a company to pay its suppliers. A higher number of days of payables suggests that the company is taking longer to pay its suppliers, which can be advantageous in managing cash flow. Walgreens Boots Alliance Inc's days of payables have generally decreased over the past five years, indicating that the company is taking more time to pay its suppliers. In 2023, the number of days of payables was 41.17 days, which signals an increase in the time taken to pay suppliers compared to the previous year.

Overall, while Walgreens Boots Alliance Inc has shown improvements in inventory management efficiency, as evidenced by the decreasing trend in DOH, there has been a slight increase in the DSO and an increase in the number of days of payables. This suggests that the company may need to focus on maintaining a balance between efficient receivables and payables management in order to optimize its working capital and overall cash flow position.

Long-term

	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Fixed asset turnover	12.88	5.57	10.77	10.86	10.10
Total asset turnover	1.45	1.48	1.62	1.59	2.01

Based on the provided data, we can analyze the long-term activity ratios of Walgreens Boots Alliance Inc - the fixed asset turnover and the total asset turnover.

Fixed Asset Turnover:
The fixed asset turnover ratio measures how efficiently a company is using its fixed assets to generate sales. In the case of Walgreens Boots Alliance Inc, the fixed asset turnover has been improving steadily over the past five years. The ratio increased from 10.15 in 2019 to 12.00 in 2023. This indicates that the company has been able to generate more sales per dollar invested in fixed assets. It suggests that the company is effectively utilizing its long-term investments in property, plant, and equipment to drive sales.

Total Asset Turnover:
The total asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue. The trend for Walgreens Boots Alliance Inc shows a slight decline in total asset turnover from 2.02 in 2019 to 1.44 in 2023. This indicates that the company's ability to generate sales from its total assets has decreased over the years. A lower total asset turnover may suggest that the company's investment in both fixed and current assets is not generating proportionate sales. It may indicate inefficiency in asset utilization.

Overall Analysis:
The improvement in fixed asset turnover suggests that Walgreens Boots Alliance Inc has been efficiently using its long-term investments in fixed assets to drive sales. However, the decline in total asset turnover raises concerns about the company's overall efficiency in utilizing its total assets to generate sales. It may be valuable for the company to analyze its asset utilization and identify areas for improvement to enhance overall efficiency in generating sales from its assets.

In conclusion, while the company has shown strong performance in utilizing fixed assets to generate sales, attention should be paid to the declining trend in total asset turnover to ensure that the company's investments in both fixed and current assets are effectively driving sales.