Westlake Chemical Corporation (WLK)

Short-term

Turnover ratios

Based on the activity ratios provided for Westlake Corporation over the past five years, we can observe the following trends:

1. Inventory Turnover:
- Westlake Corporation's inventory turnover has been relatively stable over the past five years, ranging from 5.89 to 7.33 times per year.
- This indicates that the company is efficiently managing its inventory, with a moderate level of inventory turnover compared to the industry average.

2. Receivables Turnover:
- The receivables turnover ratio has fluctuated over the years, ranging from 6.18 to 8.77 times per year.
- A higher ratio suggests that Westlake Corporation is able to collect its accounts receivable more quickly, indicating effective credit and collection policies.

3. Payables Turnover:
- The payables turnover ratio has shown a decreasing trend from 14.50 to 11.78 over the five-year period.
- A lower ratio implies that the company is taking longer to pay its suppliers, which could be due to changes in payment terms or cash flow management.

4. Working Capital Turnover:
- Westlake Corporation's working capital turnover has fluctuated over the years, ranging from 3.29 to 5.41 times per year.
- A higher turnover indicates that the company is effectively utilizing its working capital to generate sales revenue.

Overall, the analysis of these activity ratios suggests that Westlake Corporation has been able to manage its inventory efficiently, collect its receivables effectively, and utilize its working capital to generate sales. However, the decreasing trend in payables turnover may warrant further investigation into the company's payment policies and relationships with suppliers.

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Average number of days

Activity ratios are used to evaluate how efficiently a company is managing its assets and operations. Let's analyze Westlake Corporation's activity ratios based on the provided data:

1. Days of Inventory on Hand (DOH):
- Westlake Corporation's DOH has been relatively stable over the past five years, ranging from 49.82 days in 2019 to 62.00 days in 2021. A lower DOH indicates efficient inventory management, as the company is able to sell its inventory quickly. While the DOH increased in 2022 and 2023, it is important to monitor inventory levels to avoid overstocking.

2. Days of Sales Outstanding (DSO):
- The DSO for Westlake Corporation fluctuated over the years, with a peak of 59.05 days in 2020 and a low of 41.62 days in 2022. A lower DSO indicates that the company is collecting receivables quicker, which is favorable for cash flow. It is positive to see a decrease in DSO in 2022 compared to the previous years.

3. Number of Days of Payables:
- Westlake Corporation's days of payables have also varied, with a high of 38.73 days in 2021 and a low of 25.17 days in 2019. A higher number of days of payables suggests that the company is taking longer to pay its suppliers, which can improve cash flow. However, it is essential for the company to maintain good relationships with suppliers while managing payables effectively.

Overall, Westlake Corporation's activity ratios reveal fluctuations in inventory management, accounts receivable collection, and accounts payable management over the years. It is important for the company to continuously monitor and optimize these ratios to ensure efficient operations and sustainable financial performance.

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Long-term

Westlake Corporation's long-term activity ratios demonstrate the efficiency of the company in utilizing its fixed and total assets to generate sales over the past five years. The fixed asset turnover ratio has exhibited fluctuations within the range of 1.08 to 1.85, indicating variability in the company's ability to generate revenue from its long-term assets.

In particular, the substantial increase in fixed asset turnover from 2020 to 2022 suggests that Westlake has improved its efficiency in utilizing its fixed assets to generate sales during this period. However, a decline in the ratio in 2023 may indicate a decrease in the productivity of fixed assets relative to the previous year.

On the other hand, the total asset turnover ratio has ranged from 0.54 to 0.77 over the same period. This ratio indicates the company's overall efficiency in generating revenue from its total assets. The steady increase in total asset turnover from 2019 to 2022 reflects an improvement in Westlake's ability to utilize its total assets to drive sales.

The decline in total asset turnover in 2023 compared to the previous year may suggest a decrease in efficiency in utilizing the company's total assets to generate sales. Overall, analyzing both ratios provides insights into Westlake Corporation's management of its long-term assets to drive sales and revenue generation over the past five years.