Western Digital Corporation (WDC)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Inventory turnover	3.46	3.31	4.11	4.08	5.12
Receivables turnover	6.03	7.52	6.60	7.38	6.86
Payables turnover	—	—	7.87	7.62	8.08
Working capital turnover	6.63	4.90	4.39	3.41	3.52

The activity ratios for Western Digital Corporation provide insights into the efficiency of the company's operations related to inventory management, accounts receivable collection, accounts payable handling, and working capital utilization.

1. Inventory Turnover:
- The inventory turnover ratio has fluctuated over the past five years but generally indicates a decreasing trend, going from 5.12 in 2020 to 3.46 in 2024.
- The decreasing trend suggests that the company may be holding onto inventory for a longer period, which could tie up capital and result in potential obsolescence risks.

2. Receivables Turnover:
- The receivables turnover ratio shows variability from 2020 to 2024, with the highest being 7.52 in 2023 and the lowest being 6.03 in 2024.
- Despite the fluctuations, the company generally collects its receivables between 6 to 7 times a year, indicating effective management of credit extended to customers.

3. Payables Turnover:
- The payables turnover ratio was not available for 2020 and 2021 but was stable around 7.62 to 8.08 in 2022, 2023, and 2024.
- A stable payables turnover ratio suggests that the company's suppliers are being paid within a consistent timeframe, facilitating healthy vendor relationships.

4. Working Capital Turnover:
- The working capital turnover has shown an increasing trend over the five years, from 3.52 in 2020 to 6.63 in 2024.
- The increasing trend indicates that Western Digital is generating more revenue relative to its working capital, which signifies improved operational efficiency and effective utilization of resources.

In summary, the overall analysis of the activity ratios suggests that while there are some fluctuations, Western Digital Corporation has generally been efficient in managing its inventory, collecting receivables, handling payables, and optimizing its working capital turnover to generate revenue. However, the declining inventory turnover may warrant further investigation to address potential inventory management issues.

Average number of days

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Days of inventory on hand (DOH)	days	105.60	110.37	88.73	89.50	71.27
Days of sales outstanding (DSO)	days	60.51	48.55	55.28	49.43	53.17
Number of days of payables	days	—	—	46.39	47.87	45.15

Analyzing Western Digital Corporation's activity ratios over the past five years reveals some insights into the efficiency of its operations.

1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates an increase in the number of days it takes for the company to sell its inventory from 71.27 days in 2020 to 105.60 days in 2024. This suggests that the company is holding onto its inventory for a longer period, which could tie up working capital and lead to increased storage costs.

2. Days of Sales Outstanding (DSO):
- The DSO ratio demonstrates the average number of days it takes for the company to collect its accounts receivable. Western Digital improved its DSO from 53.17 days in 2020 to 48.55 days in 2023 but saw a slight increase to 60.51 days in 2024. This may indicate potential challenges in collecting payments from customers efficiently.

3. Number of Days of Payables:
- Unfortunately, there is missing data for the number of days of payables for 2020 and 2021. However, we can observe a consistent trend of around 46 to 47 days in 2022, 2023, and 2024. This suggests that Western Digital takes approximately 46 to 47 days to pay its suppliers, which is relatively stable.

Overall, Western Digital Corporation's activity ratios indicate a need to focus on managing its inventory levels more effectively and ensuring timely collections from customers to optimize working capital and cash flow. The stability in the number of days of payables suggests consistency in managing supplier payments.

Long-term

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Fixed asset turnover	4.13	3.32	5.04	5.23	5.72
Total asset turnover	0.54	0.49	0.71	0.64	0.64

Over the past five years, Western Digital Corporation has shown varying trends in its long-term activity ratios. The fixed asset turnover ratio, which measures the company's ability to generate sales from its investment in fixed assets, has fluctuated between 3.32 and 5.72. In 2024, the ratio stands at 4.13, indicating that the company generated $4.13 in sales for every dollar invested in fixed assets.

The increasing trend in fixed asset turnover from 2022 to 2023 suggests that Western Digital has been more efficient in utilizing its fixed assets to generate sales during those years. However, the slight decrease in 2024 indicates a potential slowdown in asset utilization efficiency.

On the other hand, the total asset turnover ratio, which assesses the company's overall effectiveness in generating sales from its total assets, has ranged between 0.49 and 0.71 over the same period. In 2024, the ratio is at 0.54, signaling that the company generated $0.54 in sales for each dollar of total assets.

The total asset turnover ratio has generally shown a fluctuating trend, with no clear pattern of improvement or deterioration. It indicates that Western Digital may not have been as successful in utilizing its total assets to generate revenue consistently over the past five years.

In summary, while Western Digital has demonstrated varying levels of efficiency in generating sales from its fixed assets, its overall effectiveness in utilizing total assets to drive revenue has been less consistent. Monitoring these long-term activity ratios can provide insights into the company's operational efficiency and asset utilization strategies.