Essential Utilities Inc (WTRG)

Short-term

Turnover ratios

Essential Utilities Inc's activity ratios provide insights into how efficiently the company is managing its assets and liabilities.

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company's inventory is sold and replaced during a period.
- Essential Utilities' inventory turnover has been relatively stable over the past five years, ranging from 3.01 to 3.13.
- The improvement in 2023 indicates that the company is managing its inventory more efficiently compared to previous years.

2. Receivables Turnover:
- The receivables turnover ratio shows how many times a company collects its accounts receivable during a period.
- Essential Utilities' receivables turnover has been increasing steadily over the past five years, indicating that the company is collecting its receivables more quickly.
- The significant increase from 2022 to 2023 suggests that the company has improved its credit and collection policies.

3. Payables Turnover:
- The payables turnover ratio measures how many times a company pays its suppliers during a period.
- Essential Utilities' payables turnover has shown some variability, with a notable decrease in 2023.
- A decrease in payables turnover could indicate that the company is taking longer to pay its suppliers, which may have implications for its relationships with vendors.

4. Working Capital Turnover:
- The working capital turnover ratio reflects how efficiently a company is using its working capital to generate sales.
- Essential Utilities did not report a working capital turnover for the years provided, except for 2019 when it was 0.53.
- It is essential for the company to monitor and improve its working capital turnover as it indicates the effectiveness of its working capital management.

In conclusion, Essential Utilities Inc's activity ratios suggest improvements in managing inventory and collecting receivables, but a potential increase in payment times to suppliers. Monitoring and analyzing these ratios can help the company make informed decisions to improve operational efficiency and financial performance.

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Average number of days

Essential Utilities Inc's activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of inventory on hand (DOH): The trend in DOH indicates how long, on average, Essential Utilities holds onto its inventory before selling it. A decreasing trend in DOH from 2021 to 2023 indicates an improvement in inventory turnover efficiency. However, the current DOH of 116.73 days suggests that Essential Utilities may be holding onto inventory for an extended period, which could tie up capital.

2. Days of sales outstanding (DSO): DSO reflects the average number of days it takes for Essential Utilities to collect payment from its customers after a sale. The decreasing trend from 2020 to 2023 indicates that the company has been collecting receivables more efficiently. The current DSO of 43.67 days suggests that Essential Utilities is collecting payments fairly quickly, which is a positive sign for its cash flow management.

3. Number of days of payables: This ratio represents how long Essential Utilities takes to pay its suppliers. The significant increase in the number of days of payables from 2021 to 2023 indicates that the company is taking longer to settle its payables, potentially improving its cash flow position. The current level of 229.16 days suggests that Essential Utilities might be stretching its payables, which could benefit its working capital management.

Overall, by analyzing these activity ratios, we see that Essential Utilities Inc has been improving its efficiency in managing inventory, collecting receivables, and paying suppliers over the past few years. However, the company may need to monitor its inventory holding period to optimize working capital utilization further.

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Long-term

The long-term activity ratios of Essential Utilities Inc over the past five years reflect the company's effectiveness in utilizing its fixed assets and total assets to generate revenue.

The fixed asset turnover ratio has fluctuated over the period, ranging from a low of 0.14 in 2019 to a high of 0.21 in 2022. This ratio indicates that, on average, the company generated $0.17 in revenue for each dollar of fixed assets invested in the business in 2023. A decreasing trend in this ratio over the years may indicate declining efficiency in utilizing fixed assets to generate sales.

On the other hand, the total asset turnover ratio has also varied, with the lowest value of 0.10 in 2019 and the highest of 0.15 in 2022. This ratio signifies that, on average, Essential Utilities Inc generated $0.12 in revenue for each dollar of total assets held by the company in 2023. An increasing trend in this ratio suggests improved efficiency in using total assets to generate sales.

Overall, the company's fixed asset turnover ratio indicates some fluctuations, while the total asset turnover ratio has shown a general increasing trend, reflecting improved efficiency in utilizing assets to generate revenue. It is essential for the company to monitor and manage its asset turnover ratios to ensure optimal utilization of resources and sustainable growth in the long term.