Watsco Inc (WSO)
Working capital turnover
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Revenue | US$ in thousands | 7,283,770 | 7,274,340 | 6,280,190 | 5,054,930 | 4,770,360 |
| Total current assets | US$ in thousands | 2,391,930 | 2,298,740 | 1,961,400 | 1,484,440 | 1,546,730 |
| Total current liabilities | US$ in thousands | 712,012 | 906,522 | 726,722 | 487,145 | 461,717 |
| Working capital turnover | 4.34 | 5.23 | 5.09 | 5.07 | 4.40 |
December 31, 2023 calculation
Working capital turnover = Revenue ÷ (Total current assets – Total current liabilities)
= $7,283,770K ÷ ($2,391,930K – $712,012K)
= 4.34
Watsco Inc.'s working capital turnover has shown some fluctuations over the past five years. The working capital turnover ratio indicates how efficiently the company is utilizing its working capital to generate sales revenue. The ratio measures the number of times working capital is turned over in generating net sales.
In 2023, the working capital turnover ratio decreased to 4.34 from 5.23 in 2022, indicating a decline in efficiency in utilizing working capital to drive sales. However, compared to 2019, the ratio has still improved. The decrease in the ratio could suggest that Watsco Inc. is not efficiently managing its working capital to support its sales operations.
Despite the fluctuations, the company has generally maintained a relatively high working capital turnover ratio over the past five years, indicating effective management of working capital in relation to sales generation. Further analysis would be necessary to understand the underlying causes of the changes in the ratio and assess the overall effectiveness of Watsco Inc.'s working capital management strategies.