Melissa Bockhold Heather Coddington - Franklin College

the ratio shows that Quantum turns their inventory over almost twice as often as Seagate.
This could imply that Seagate is either being very effective with their buying, or they are
showing weak sales.
Days’ Sales in Inventory shows how long it takes a company to turn raw materials
into sales. Seagate has the longest period with 31.36 days, and Quantum has the lowest
with just 16.33 days. This ratio could indicate that Seagate needs to reduce the amount of
time it takes to turn their raw materials into sales. More importantly, because Seagate is
vertically integrated, they should have a lower Inventory Turnover and Days’ Sales in
Inventory.
The Receivables Turnover is used to determine how effective a company is at
collecting debt and extending credit. A low ratio would essentially imply that the
company is inefficient in their collection of debt. A high ratio could show that a
company is efficient in debt collection or that they operate on a cash basis. Seagate has a
ratio of 7.8. The lowest is Maxtor at 7.57, and the highest is Western Digital at 10.14.
From these ratios, it appears that the industry is relatively consistent in their debt
collection abilities.
Days’ Sales in Receivables is a measure of how many days it takes a company to
collect on their credit sales. According to our numbers, it takes Seagate 46 days to collect
on their credit sales. Comparing this to the competitors, we can see that the company
with the quickest collection time is Western Digital with a collection period of 36 days.
The longest is Maxtor with 48.18 days. While Seagate’s 46-day collection period seems
long, it is still comparable to the competition.
31