Zimmer Biomet Holdings Inc (ZBH)

Short-term

Turnover ratios

1. Inventory turnover: The inventory turnover ratio for Zimmer Biomet Holdings Inc has been fluctuating over the past five years, ranging from 0.87 to 0.98. This indicates the number of times the company's inventory was sold and replaced during the year. A lower turnover ratio may suggest inefficiencies in inventory management or slower sales, while a higher ratio typically indicates efficient inventory management.

2. Receivables turnover: The receivables turnover ratio shows how efficiently Zimmer Biomet collects cash from its customers. The company's ratio has ranged from 4.84 to 5.85 over the five-year period, with a peak in 2021. A higher ratio implies that the company is collecting receivables quickly, which is a positive sign for cash flow and liquidity.

3. Payables turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Zimmer Biomet's payables turnover ratio has ranged from 5.62 to 6.67 over the five years, indicating that the company has been able to pay its suppliers relatively quickly. A higher ratio may suggest that the company is efficiently managing its payables and maintaining good relationships with suppliers.

4. Working capital turnover: The working capital turnover ratio reflects how efficiently Zimmer Biomet is using its working capital to generate sales. The ratio has varied from 2.78 to 6.22 over the five-year period, with a significant increase in 2021. A higher ratio indicates that the company is utilizing its working capital effectively to generate revenue, while a lower ratio may suggest inefficiencies in capital utilization.

Overall, analyzing these activity ratios provides insights into Zimmer Biomet's operational efficiency, inventory management, cash collection practices, and working capital utilization over the past five years.

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Average number of days

Activity ratios provide insights into how efficiently a company is managing its assets and operating cycle. Let's analyze the activity ratios of Zimmer Biomet Holdings Inc over the last five years:

1. Days of Inventory on Hand (DOH):
- The days of inventory on hand have increased from 386.45 days in 2019 to 417.79 days in 2023. This indicates that Zimmer Biomet is holding onto its inventory for a longer period before selling it.
- An increasing trend in DOH may suggest that the company is facing challenges in managing its inventory efficiently, potentially leading to higher carrying costs and obsolescence risk.

2. Days of Sales Outstanding (DSO):
- The days of sales outstanding have varied slightly over the years, with a peak of 75.48 days in 2020 and a low of 62.37 days in 2019. In 2023, the DSO stands at 71.20 days.
- A decreasing DSO generally implies that Zimmer Biomet is collecting its receivables more quickly, which can improve cash flow and reduce the risk of bad debts. However, the current level indicates room for improvement.

3. Number of Days of Payables:
- Zimmer Biomet's days of payables have shown fluctuations, with the highest value of 71.92 days in 2023 and the lowest value of 54.76 days in 2021. The company has been taking more time to pay its suppliers in recent years.
- An increasing trend in the number of days of payables could be a strategy to manage working capital effectively, but it may also strain relationships with suppliers if extended payment terms are not sustainable.

Overall, Zimmer Biomet Holdings Inc may need to focus on optimizing its inventory management, enhancing accounts receivable collection, and carefully managing payment terms with suppliers to improve its operational efficiency and cash flow performance.

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Long-term

Zimmer Biomet Holdings Inc's long-term activity ratios provide insights into the efficiency of the company's utilization of assets over a period of five years.

The fixed asset turnover ratio has shown fluctuations but generally remained at healthy levels, ranging from 3.43 to 3.89. This indicates that the company generates significant revenue from its fixed assets, such as property, plant, and equipment. A high fixed asset turnover ratio suggests that Zimmer Biomet efficiently utilizes its fixed assets to generate sales.

In contrast, the total asset turnover ratio has also demonstrated some variability over the years but has remained relatively stable. The ratio ranged from 0.29 to 0.34, indicating that the company generates lower sales compared to its total assets. This could suggest that Zimmer Biomet may have a large asset base relative to its sales revenue.

Overall, the fixed asset turnover ratio indicates strong efficiency in utilizing fixed assets to generate revenue, while the total asset turnover ratio indicates a moderate efficiency in generating sales relative to total assets. These ratios provide valuable insights into Zimmer Biomet's operational efficiency and asset management strategies over the years.