Wolfspeed Inc (WOLF)

Short-term

Turnover ratios

Wolfspeed Inc's activity ratios provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.

- Inventory turnover has been declining over the past five years, indicating that the company is taking longer to sell its inventory. This could be a concern as it may indicate issues with inventory management or decreasing demand for the company's products.

- Receivables turnover has also shown a decreasing trend over the years, implying that it takes longer for the company to collect payments from its customers. This may suggest tightening credit policies or challenges in collecting receivables promptly.

- On the other hand, payables turnover has been increasing steadily, indicating that the company is taking longer to pay its suppliers. This can potentially be a positive sign as it suggests that the company is able to hold onto its cash longer before paying its obligations.

- Working capital turnover has fluctuated over the years but has generally been on a downward trend. This implies that the company is generating fewer sales for every dollar of working capital invested. It may indicate inefficiencies in the utilization of working capital resources.

In conclusion, while some activity ratios of Wolfspeed Inc show positive trends, such as payables turnover, others like inventory turnover and working capital turnover raise concerns about operating efficiency and overall financial health. Further analysis and monitoring of these ratios are advisable to address potential operational and financial performance issues.

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Average number of days

Wolfspeed Inc.'s activity ratios provide insight into how efficiently the company manages its inventory, collects receivables, and pays its payables.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increase over the past five years, indicating that inventory turnover has slowed down.
- The higher DOH in 2024 (164.64 days) compared to previous years may suggest potential issues with excess inventory levels or lower sales efficiency.
- It is important for Wolfspeed Inc. to address the increasing DOH to avoid tying up capital in slow-moving inventory.

2. Days of Sales Outstanding (DSO):
- The DSO ratio fluctuates over the years but shows a general increase from 2020 to 2022 before decreasing in 2023 and then increasing again in 2024.
- A higher DSO indicates that it takes longer for the company to collect its accounts receivables, which may impact liquidity and cash flow.
- The increase in DSO in 2024 (89.87 days) compared to 2023 could suggest a need to improve credit policies or collections efficiency.

3. Number of Days of Payables:
- The days of payables outstanding have decreased steadily from 2020 to 2024, indicating that the company is taking less time to pay its suppliers.
- A decreasing trend in payables days can sometimes signal stronger bargaining power with suppliers but may also indicate a potential strain on the company's cash flow if payment terms become too short.

In conclusion, Wolfspeed Inc. should focus on optimizing inventory management, improving accounts receivable collection processes, and maintaining a balanced approach to managing payables to enhance overall working capital efficiency and financial health.

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Long-term

Wolfspeed Inc's long-term activity ratios indicate its efficiency in utilizing its fixed assets and total assets to generate sales revenue.

The fixed asset turnover ratio has been decreasing over the years from 1.06 in 2020 to 0.22 in 2024. This suggests a significant decrease in the company's ability to generate sales relative to its investment in fixed assets. A lower fixed asset turnover ratio may indicate over-investment in fixed assets or underutilization of existing assets, which could lead to inefficiencies in the company's operations.

Similarly, the total asset turnover ratio has also been declining over the years, from 0.27 in 2020 to 0.10 in 2024. This decline indicates a decreasing ability of the company to generate sales relative to its total assets. A lower total asset turnover ratio may suggest that the company is not effectively utilizing its total assets to drive sales, which could potentially impact its profitability and overall financial performance.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios for Wolfspeed Inc raises concerns about its asset utilization efficiency and operational performance. It may be prudent for the company to review its asset management strategies and identify opportunities to improve efficiency in order to enhance its long-term profitability and sustainability.