In: Finance
Company 1
Industry Median | 2020 | 2019 | 2018 | 2017 | |
A/R Turnover | 119.6 | 75.8 | 74.3 | 86.7 | 92.0 |
Avg. A/R Days | 3.1 | 4.8 | 4.9 | 4.3 | 4.0 |
Inv Turnover | 3.5 | 5.9 | 5.9 | 6.0 | 5.8 |
Avg. Inventory Days | 103.0 | 61.3 | 61.8 | 61.3 | 62.6 |
Avg. A/P Days | 51.0 | 65.3 | 63.0 | 57.8 | 54.3 |
Fixed Asset Turnover | 2.59 | 2.79 | 2.80 | 2.85 | 2.82 |
WC / Sales Growth | (1.6%) | (0.6%) | (1.1%) | (1.4%) | (1.7%) |
Bad Debt Allowance (% of A/R) | - | - | - | - | - |
ROIC | - | 12.0% | 10.8% | 9.9% | 10.2% |
Revenue per Employee ($) | - | $214,593.40 | $213,775.90 | $217,706.60 | $211,659.60 |
Company 2
Industry Median | 2020 | 2019 | 2018 | 2017 | |
A/R Turnover | 26.8 | 74.2 | 75.1 | 74.7 | 68.2 |
Avg. A/R Days | 13.6 | 4.9 | 4.8 | 5.0 | 5.4 |
Inv Turnover | 10.2 | 13.7 | 14.2 | 14.6 | 14.1 |
Avg. Inventory Days | 35.6 | 26.6 | 25.7 | 25.4 | 26.4 |
Avg. A/P Days | 31.8 | 23.7 | 22.9 | 22.6 | 23.9 |
Fixed Asset Turnover | 5.21 | 4.86 | 5.67 | 5.83 | 5.68 |
WC / Sales Growth | (0.4%) | (0.1%) | (0.4%) | 0.1% | 0.1% |
Bad Debt Allowance (% of A/R) | 1.7% | - | - | - | - |
ROIC | - | 5.5% | 13.1% | 4.1% | 8.8% |
Revenue per Employee ($) | - | $275,418.90 | $268,651.90 | $275,026.90 | $263,929.10 |
Please discuss which company operates more efficiently. The
discussion may include, but not exhaustive to the inventory
management system, capacity utilization, supply chain etc
Company 1 |
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Ind.Med. | 2020 | 2019 | 2018 | 2017 | Analysis & comments | |
A/R Turnover | 119.6 | 75.8 | 74.3 | 86.7 | 92 | The company takes more time to convert receivables to cash than the industry peers & the collection rate has deteriorated over the years 2017 to 2020. |
Avg. A/R Days | 3.1 | 4.8 | 4.9 | 4.3 | 4 | Days'sales outstanding is marginally more than the industry average--- on an average, receivables are collected once in 4.5 days. |
Inv Turnover | 3.5 | 5.9 | 5.9 | 6 | 5.8 | Finished Inventory is converted to sales approximately 6 times in a year --- a better performance compared to the industry which turns around 3.5 times only. |
Avg. Inventory Days | 103 | 61.3 | 61.8 | 61.3 | 62.6 | so, it has taken around 61 days to get converted to a sale , whereas, the industry peers take 103 days in inventory |
Avg. A/P Days | 51 | 65.3 | 63 | 57.8 | 54.3 | Creditors are paid quite later than by the industry --taking advantage of the cash available , in the meanwhile. |
Fixed Asset Turnover | 2.59 | 2.79 | 2.8 | 2.85 | 2.82 | ATO=$ Sales/Total assets , ie. $ sales generated per $ of total assets employed/utilised, in all the years --- is marginally better than the industry --indicating optimum asset utilisation |
WC / Sales Growth | -1.60% | -0.60% | -1.10% | -1.40% | -1.70% | Called the Working Capital Turnover Ratio-- it being negative means that the Company does not have adequate short term funds , in comparison to the growth achieved in sales during that period. But compared to industry, the company , is in a better position--might be, that is the norm of the industry. |
Bad Debt All.(% of A/R) | - | - | - | - | - | |
ROIC | - | 12.00% | 10.80% | 9.90% | 10.20% | Return generated of invested capital (ie. Debt+equity) is seen increasing in 2020, after a slump in 2018. |
Revenue per Employee ($) | - | 214593.4 | 213775.9 | 217706.6 | 211659.6 | Revenue /employee has been maintained on an average of more than $ 210000 in all the years. |
Company 2 | ||||||
Ind.Med. | 2020 | 2019 | 2018 | 2017 | ||
A/R Turnover | 26.8 | 74.2 | 75.1 | 74.7 | 68.2 | The company takes far more, less time to convert receivables to cash than the industry peers & the collection rate is seen marginaly over the years 2017 to 2020. |
Avg. A/R Days | 13.6 | 4.9 | 4.8 | 5 | 5.4 | Days'sales outstanding is far, far less than the industry average--- on an average, receivables are collected once in 4- 5 days, where as it takes more than 13 days for the industry peers. |
Inv Turnover | 10.2 | 13.7 | 14.2 | 14.6 | 14.1 | Finished Inventory also is converted to sales more no.of times --approximately 13-14 times in a year --- a much better performance compared to the industry which turns around 10.2 times only. |
Avg. Inventory Days | 35.6 | 26.6 | 25.7 | 25.4 | 26.4 | so, it has taken around only 25 days to get converted to a sale , whereas, the industry peers take 35 days in inventory |
Avg. A/P Days | 31.8 | 23.7 | 22.9 | 22.6 | 23.9 | Creditors are paid in lesser no.of days than by the industry -- can try to take advantage of maximum credit days offered by the vendors, atleast upto the industry average. |
Fixed Asset Turnover | 5.21 | 4.86 | 5.67 | 5.83 | 5.68 | ATO=$ Sales/Total assets , ie. $ sales generated per $ of total assets employed/utilised, in almost all the years(except 2020) --- is marginally better than the industry --indicating optimum asset utilisation |
WC / Sales Growth | -0.40% | -0.10% | -0.40% | 0.10% | 0.10% | Called the Working Capital Turnover Ratio-- it being negative means that the Company does not have adequate short term funds , in comparison to the growth achieved in sales during that period. But compared to industry, the company , is in a better position, in all of 3 years , except in 2019 when it was on par with teh industry--might be, that is the norm in the industry. |
Bad Debt All.(% of A/R) | 1.70% | - | - | - | - | |
ROIC | - | 5.50% | 13.10% | 4.10% | 8.80% | Return generated of invested capital (ie. Debt+equity) does not seem to have anysuggestive trend at all.It is quite erratic , but positive & the average is around 6% p.a. |
Revenue per Employee ($) | - | 275418.9 | 268651.9 | 275026.9 | 263929.1 | Revenue /employee has been maintained on an average of more than $ 260000 in all the years. |
Company 2 seems to be better than its industry peers in all the metrics, ie. Receivables/days'sales outsatndings , inventory/ supply days & asset /capacity utilisation | ||||||
But it does not take full advantage of supplier credit | ||||||
Company 1 is lagging only in receivables management than its industry peers. | ||||||
But it is taking better advantage of supplier credit than Company 1 | ||||||
ROIC is better for company 1 than company 2 | ||||||
Company 2 operates marginally more efficiently than Company 1 |