Baker Hughes Co (BKR)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 0.63 | 0.63 | 0.75 | 0.72 | 4.51 |
| Receivables turnover | 3.88 | 3.58 | 3.43 | 3.58 | 3.57 |
| Payables turnover | 0.68 | 0.72 | 0.80 | 0.77 | 5.65 |
| Working capital turnover | 6.55 | 7.65 | 5.82 | 3.40 | 3.23 |
The activity ratios of Baker Hughes Co provide insights into the efficiency of their operations in managing inventory, receivables, payables, and working capital.
1. Inventory Turnover: Baker Hughes Co's inventory turnover decreased significantly from 4.51 in 2020 to 0.63 in both 2023 and 2024. This indicates that the company's inventory is now being sold at a slower rate, which could lead to excess inventory levels or potential obsolescence issues.
2. Receivables Turnover: The receivables turnover ratio remained relatively stable over the years, ranging from 3.43 to 3.88. This suggests that Baker Hughes Co is efficiently collecting payments from customers, with minor fluctuations in the efficiency of their accounts receivable management.
3. Payables Turnover: The payables turnover ratio declined from 5.65 in 2020 to 0.68 in 2024, indicating a slower rate at which the company is paying its suppliers. This may reflect changes in the company's payment terms or liquidity constraints impacting their ability to settle payables promptly.
4. Working Capital Turnover: The working capital turnover ratio fluctuated over the years, reaching a peak of 7.65 in 2023. This suggests that Baker Hughes Co is effectively utilizing its working capital to generate sales, with a notable increase in efficiency between 2020 and 2022.
Overall, the analysis of Baker Hughes Co's activity ratios highlights areas where the company may need to improve efficiency, particularly in managing inventory levels and payables turnover, while continuing to effectively collect payments from customers and utilize working capital to drive sales.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 583.67 | 576.35 | 486.00 | 506.39 | 80.85 |
| Days of sales outstanding (DSO) | days | 94.08 | 101.95 | 106.33 | 102.09 | 102.15 |
| Number of days of payables | days | 535.13 | 505.86 | 455.38 | 476.61 | 64.59 |
Based on the provided data for Brewer Hughes Co, the activity ratios can provide insights into the efficiency of the company's operations.
1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates the number of days it takes for the company to sell its inventory.
- The DOH increased significantly from 80.85 days in 2020 to 583.67 days in 2024. This suggests a substantial buildup of inventory or slower inventory turnover over the years.
- A high DOH may indicate excess inventory levels that could lead to higher holding costs and potential obsolescence risks.
2. Days of Sales Outstanding (DSO):
- DSO reflects the average number of days it takes for the company to collect its accounts receivable.
- The DSO remained relatively stable, ranging from 94.08 days in 2024 to 102.15 days in 2020. This indicates consistent collection practices.
- A lower DSO is generally favorable as it signifies that the company is collecting payments from customers more quickly.
3. Number of Days of Payables:
- This ratio shows the average number of days the company takes to pay its suppliers.
- The number of days of payables increased dramatically from 64.59 days in 2020 to 535.13 days in 2024. This suggests a significant extension in payment terms or slower payment to suppliers.
- An extended payment period can sometimes signify liquidity issues, strained supplier relationships, or a deliberate strategy to manage cash flow.
In conclusion, the analysis of these activity ratios for Baker Hughes Co indicates potential concerns regarding inventory management and the significant increase in days of payables. Further examination and comparison with industry benchmarks would provide a more comprehensive understanding of the company's operational efficiency.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.39 | 5.18 | 4.51 | 4.14 | 3.75 |
| Total asset turnover | 0.72 | 0.69 | 0.60 | 0.57 | 0.53 |
The analysis of Baker Hughes Co's long-term activity ratios, specifically the Fixed Asset Turnover and Total Asset Turnover ratios, provides valuable insights into the company's asset utilization efficiency over the years.
1. Fixed Asset Turnover:
- The Fixed Asset Turnover ratio measures how effectively the company is utilizing its fixed assets to generate revenue.
- From 2020 to 2024, Baker Hughes Co's Fixed Asset Turnover ratio has shown a consistent upward trend, increasing from 3.75 in 2020 to 5.39 in 2024.
- This indicates that the company has been able to generate more revenue per dollar of fixed assets invested, reflecting efficient utilization of its long-term assets.
2. Total Asset Turnover:
- The Total Asset Turnover ratio evaluates the company's ability to generate sales from its total assets.
- Over the same period, Baker Hughes Co's Total Asset Turnover ratio has also exhibited an upward trajectory, rising from 0.53 in 2020 to 0.72 in 2024.
- This indicates that the company has become more efficient in utilizing its total assets to generate sales revenue, reflecting an improvement in overall asset utilization efficiency.
In summary, the increasing trends in both the Fixed Asset Turnover and Total Asset Turnover ratios for Baker Hughes Co suggest a positive development in the company's operational efficiency and asset utilization capabilities over the years. These improvements may indicate better management of resources and potentially higher profitability levels as the company generates more revenue from its assets.