Archer-Daniels-Midland Company (ADM)

Short-term

Turnover ratios

Archer-Daniels-Midland Company's activity ratios provide insights into how efficiently the company is managing its assets and operations.

1. Inventory turnover:
The inventory turnover ratio measures how many times a company sells and replaces its inventory within a specific period. Archer-Daniels-Midland Company has maintained a relatively consistent inventory turnover ratio over the past few quarters, averaging around 6 to 8 times. This indicates that the company is efficiently managing its inventory levels and is able to sell and replace its inventory multiple times throughout the year.

2. Receivables turnover:
The receivables turnover ratio reflects how quickly a company collects cash from its credit sales. Archer-Daniels-Midland Company's receivables turnover ratio has also been relatively stable, ranging from around 20 to 28 times. A higher turnover indicates efficient management of accounts receivable and timely collection of cash from customers.

3. Payables turnover:
The payables turnover ratio measures how quickly a company pays off its suppliers. Archer-Daniels-Midland Company's payables turnover has shown some fluctuations but generally hovers around 15 to 20 times. A higher payables turnover ratio suggests that the company is efficiently managing its accounts payable by paying suppliers promptly.

4. Working capital turnover:
The working capital turnover ratio assesses how effectively a company is utilizing its working capital to generate sales. Archer-Daniels-Midland Company's working capital turnover has also remained relatively stable, averaging around 7 to 11 times. A higher turnover ratio indicates efficient utilization of working capital to support the company's operations and generate revenue.

Overall, based on these activity ratios, Archer-Daniels-Midland Company appears to be effectively managing its assets and operations to support its sales and financial performance.

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Average number of days

Archer-Daniels-Midland Company'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 DOH ranged from a low of 45.85 days to a high of 75.43 days over the past few quarters, indicating fluctuations in inventory management efficiency.
- A decreasing trend in DOH from 2020 to 2024 suggests the company has been managing its inventory more effectively, with the latest figure at 48.51 days.
- However, the DOH is higher than the industry average, implying that there may be room for improvement in inventory turnover to free up working capital.

2. Days of Sales Outstanding (DSO):
- DSO ranged from 12.97 days to 20.64 days in the last few quarters, showing variability in the company's ability to collect receivables promptly.
- A decreasing trend in DSO from 2020 to 2024 indicates improved efficiency in accounts receivable management, with the latest figure at 15.81 days.
- The current DSO is lower than the industry average, suggesting that Archer-Daniels-Midland is efficient in collecting payments from customers.

3. Number of Days of Payables:
- The number of days of payables ranged from 17.62 days to 30.30 days over recent quarters, demonstrating fluctuations in the company's payment practices.
- An increasing trend in payables days from 2020 to 2024 suggests that the company is taking longer to pay its suppliers, with the latest figure at 22.17 days.
- The current payables period is below the industry average, indicating that the company is efficiently managing its payables but may want to strike a balance between optimizing cash flow and maintaining supplier relationships.

In summary, Archer-Daniels-Midland Company has shown improvements in inventory turnover and accounts receivable collection efficiency, but may need to monitor its payables period to optimize working capital management.

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Long-term

Archer-Daniels-Midland Company's long-term activity ratios, specifically the fixed asset turnover and total asset turnover, provide insights into how efficiently the company is utilizing its assets to generate sales.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how effectively the company generates sales from its fixed assets.
- Over the past few quarters, the fixed asset turnover ratio has shown a declining trend from 10.28 in Dec 2022 to 6.40 in Sep 2020.
- A higher fixed asset turnover ratio indicates that the company is efficiently utilizing its fixed assets to generate revenues. However, a declining trend could suggest potential inefficiencies in asset utilization or changes in business operations.

2. Total Asset Turnover:
- The total asset turnover ratio evaluates the company's ability to generate sales from all its assets, including fixed and current assets.
- The total asset turnover ratio has fluctuated over the quarters, with values ranging from 1.47 in Dec 2020 to 1.29 in Mar 2021.
- A higher total asset turnover ratio signifies that the company is efficient in utilizing all its assets to generate sales revenue, indicating strong asset management. However, fluctuations in this ratio may indicate changes in the company's operating efficiency or asset base composition.

In conclusion, while Archer-Daniels-Midland Company has displayed varying trends in its long-term activity ratios, it is crucial for the company to assess the reasons behind these fluctuations and strive for consistent improvement in asset utilization to enhance overall operational efficiency and profitability.