Westlake Chemical Corporation (WLK)

Short-term

Turnover ratios

The activity ratios of Westlake Chemical Corporation provide insight into how efficiently the company manages its inventory, receivables, payables, and working capital.

1. Inventory turnover: This ratio measures how many times a company's inventory is sold and replaced within a specific period. Westlake's inventory turnover has shown a slight decrease from 7.06 in 2020 to 6.00 in 2024. This could indicate a potential slowdown in inventory management efficiency or changes in demand for the company's products.

2. Receivables turnover: The receivables turnover ratio reflects how quickly a company collects payments from its customers. Westlake experienced fluctuations in this ratio, with an increase from 6.18 in 2020 to 8.19 in 2024. A higher turnover could suggest improved credit policies or timely collections from customers.

3. Payables turnover: This ratio demonstrates how effectively a company pays its suppliers. Westlake's payables turnover decreased from 12.09 in 2020 to 11.97 in 2024, indicating a slight slowdown in payment efficiency. This could be due to changes in the company's supplier relationships or payment terms.

4. Working capital turnover: The working capital turnover ratio shows how efficiently a company utilizes its working capital to generate sales. Westlake's working capital turnover decreased from 3.54 in 2020 to 3.04 in 2024, indicating a decline in the efficiency of working capital management. This could potentially impact the company's ability to generate revenue with its current level of working capital.

Overall, while some of Westlake Chemical Corporation's activity ratios have fluctuated over the years, it is essential for the company to analyze the underlying reasons for these changes and take appropriate actions to optimize its working capital, inventory management, and relationships with customers and suppliers.

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Average number of days

Westlake Chemical Corporation's Days of Inventory on Hand (DOH) have increased from 51.70 days in December 2020 to 60.82 days in December 2024. This indicates that the company is holding inventory for a longer period before selling it, which could tie up cash and increase storage costs.

In contrast, the Days of Sales Outstanding (DSO) have decreased from 59.05 days in December 2020 to 44.58 days in December 2024. A decline in DSO suggests that Westlake Chemical is collecting its accounts receivable more efficiently, possibly indicating effective credit policies or improved customer payment practices.

The Number of Days of Payables has fluctuated over the years, ranging from 27.68 days to 38.73 days. This metric reflects the number of days it takes Westlake Chemical to pay its suppliers. A lower number of days indicates that the company is paying its creditors more quickly, potentially improving supplier relationships but also requiring more immediate cash outflows.

Overall, Westlake Chemical Corporation has shown mixed performance in its activity ratios, with improvements in DSO but an increase in DOH, which may require further analysis to understand the impact on the company's operational efficiency and cash flow management.

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Long-term

Long-term activity ratios provide insights into how efficiently a company is utilizing its assets. Looking at the data provided for Westlake Chemical Corporation, we analyze the fixed asset turnover and total asset turnover ratios over the five-year period.

1. Fixed Asset Turnover: This ratio measures how effectively a company generates sales revenue from its investments in fixed assets. Westlake Chemical's fixed asset turnover has shown fluctuation over the five-year period, increasing from 1.08 in 2020 to 1.86 in 2022, indicating an improvement in utilizing fixed assets to generate sales. However, there was a slight decline in 2023 and 2024, with the ratio dropping to 1.47 and 1.41, respectively.

2. Total Asset Turnover: The total asset turnover ratio reflects how well a company is utilizing all its assets to generate revenue. Westlake Chemical's total asset turnover has also displayed variation over the years, increasing from 0.54 in 2020 to 0.77 in 2022, showing an enhancement in overall asset utilization efficiency. However, there was a decrease in 2023 and 2024, with the ratio dropping to 0.60 and 0.59, respectively.

Overall, while Westlake Chemical Corporation experienced fluctuations in its long-term activity ratios over the five-year period, the company demonstrated improvements in asset utilization efficiency, particularly evident in the increase in fixed asset turnover from 2020 to 2022. It is important for the company to closely monitor these ratios to ensure optimal utilization of its assets to drive profitability and growth in the long term.