Archer-Daniels-Midland Company (ADM)

Short-term

Turnover ratios

Archer-Daniels-Midland Company's inventory turnover has shown a general upward trend over the past five years, indicating that the company is managing its inventory more efficiently. This suggests that the company is selling its inventory more quickly, which can reduce holding costs and increase overall profitability.

The receivables turnover ratio has fluctuated over the years but has remained relatively stable overall. A high receivables turnover ratio indicates that the company is collecting its accounts receivable quickly, which is a positive sign of efficient credit management.

The payables turnover ratio has shown a decreasing trend over the past five years, which may indicate that the company is taking longer to pay its suppliers. While a lower payables turnover ratio may suggest tighter cash flow management, it could also signal potential liquidity challenges if not managed effectively.

The working capital turnover ratio has fluctuated over the years but has generally remained within a reasonably stable range. This ratio reflects how efficiently the company is using its working capital to generate sales. A higher working capital turnover ratio suggests more effective utilization of resources.

Overall, Archer-Daniels-Midland Company's activity ratios indicate that the company has been improving its inventory management and maintaining stable efficiency in receivables and working capital turnover. However, the decreasing trend in payables turnover warrants closer attention to ensure healthy supplier relationships and adequate liquidity management.

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Average number of days

Archer-Daniels-Midland Company's activity ratios demonstrate the efficiency of the company in managing its inventory, collecting receivables, and paying its suppliers over the last five years.

1. Days of Inventory on Hand (DOH):
- The DOH ratio measures how many days, on average, the company holds its inventory before selling it.
- Over the five years, there has been a fluctuation in Archer-Daniels-Midland's inventory holding period.
- The trend shows some improvement from 2020 to 2023, with a decrease in days of inventory on hand. This suggests better inventory management efficiency.

2. Days of Sales Outstanding (DSO):
- The DSO ratio indicates how long it takes for the company to collect its accounts receivable from credit sales.
- The trend in DSO for Archer-Daniels-Midland shows some variability over the years, but generally, the collection period has remained relatively stable.
- A decrease in DSO from 2019 to 2021 indicates quicker collection of receivables, which is a positive sign of effective credit management.

3. Number of Days of Payables:
- This ratio reflects the average number of days the company takes to pay its suppliers for purchases on credit.
- Archer-Daniels-Midland's payables period has shown some volatility over the years, with fluctuations in the payment cycle.
- The increase in the number of days of payables from 2019 to 2023 suggests the company is taking more time to settle its payables, which can be a strategic approach to managing cash flows.

In conclusion, examining the activity ratios of Archer-Daniels-Midland Company reveals the company's efforts to enhance operational efficiency in managing its inventory, receivables, and payables. While improvements have been seen in some areas, there are fluctuations and room for further optimization in others.

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Long-term

The long-term activity ratios of Archer-Daniels-Midland Company indicate how efficiently the company is utilizing its assets to generate sales.

Fixed asset turnover has been fluctuating over the past five years, ranging from 6.40 to 10.22. The ratio peaked in 2022 at 10.22 before decreasing slightly to 8.94 in 2023. This indicates that the company generated $8.94 in sales for every $1 invested in fixed assets in 2023. Overall, the trend suggests that the company has been able to efficiently utilize its fixed assets to generate revenue, with a notable improvement seen in 2022.

Total asset turnover has also experienced variability over the same period, ranging from 1.29 to 1.72. The ratio has generally shown an increasing trend, with a significant improvement in 2023 compared to 2022. In 2023, the company generated $1.72 in sales for every $1 of total assets, indicating a more efficient utilization of both fixed and current assets to generate revenue.

Overall, the data suggests that Archer-Daniels-Midland Company has shown improvement in both fixed asset turnover and total asset turnover over the past five years, indicating an enhanced efficiency in utilizing its assets to generate sales. This could be a positive sign of effective management of the company's asset base.