BorgWarner Inc (BWA)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 8.86 | 10.44 | 7.81 | 6.42 | 10.00 |
| Receivables turnover | 4.57 | 5.11 | 5.12 | 3.48 | 5.29 |
| Payables turnover | — | 4.73 | 5.26 | — | 6.09 |
| Working capital turnover | 5.80 | 5.31 | 5.30 | 4.31 | 6.75 |
Inventory turnover is a financial ratio that measures how efficiently a company manages its inventory. BorgWarner Inc's inventory turnover has generally been increasing over the past five years, indicating that the company is more efficient in converting its inventory into sales. This trend is a positive sign of effective inventory management.
Receivables turnover measures how quickly a company collects payments from its customers. BorgWarner's receivables turnover has fluctuated slightly over the years but remains within a consistent range. This suggests that the company is effectively managing its accounts receivable and collecting payments in a timely manner.
Payables turnover measures how quickly a company pays its suppliers. BorgWarner's payables turnover has also remained relatively steady over the years. A consistent payables turnover ratio indicates that the company is managing its accounts payable efficiently and maintaining good relationships with its suppliers.
Working capital turnover is a measure of how efficiently a company utilizes its working capital to generate revenue. BorgWarner's working capital turnover has fluctuated over the years but generally remains at a healthy level. A higher working capital turnover ratio indicates that the company is utilizing its working capital effectively to support its operations and generate revenue.
Overall, based on the activity ratios analyzed, BorgWarner Inc appears to be effectively managing its inventory, accounts receivable, accounts payable, and working capital to support its business operations and drive revenue growth.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 41.21 | 34.98 | 46.73 | 56.86 | 36.51 |
| Days of sales outstanding (DSO) | days | 79.93 | 71.38 | 71.29 | 104.81 | 68.96 |
| Number of days of payables | days | — | 77.14 | 69.33 | — | 59.95 |
To analyze the activity ratios of BorgWarner Inc, we will focus on the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.
The Days of Inventory on Hand (DOH) measures how many days, on average, it takes for the company to sell its inventory. In the most recent year, BorgWarner has shown an improvement in managing its inventory, with the DOH decreasing from 48.48 days in 2022 to 41.21 days in 2023. This indicates that BorgWarner has been more efficient in selling off its inventory.
The Days of Sales Outstanding (DSO) measures the number of days it takes for the company to collect its accounts receivable. BorgWarner's DSO has increased from 76.76 days in 2022 to 79.93 days in 2023. This suggests that the company is taking slightly longer to collect payments from its customers compared to the previous year.
The Number of Days of Payables indicates the average number of days it takes for BorgWarner to pay its suppliers. The company has shown an increase in the number of days of payables from 77.14 days in 2022 to 79.90 days in 2023. This indicates that BorgWarner is taking longer to pay its suppliers, which could be a strategy to manage cash flow effectively.
Overall, BorgWarner has shown improvements in managing its inventory but has experienced a slight increase in the time taken for collections and payments. This suggests a need for the company to focus on optimizing its working capital management to improve efficiency and cash flow.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.78 | 3.70 | 3.38 | 2.22 | 3.48 |
| Total asset turnover | 0.98 | 0.74 | 0.90 | 0.63 | 1.05 |
The long-term activity ratios for BorgWarner Inc indicate the efficiency and utilization of the company's assets over the past five years.
The fixed asset turnover has shown a generally improving trend from 2019 to 2023, increasing from 3.48 to 3.75. This suggests that BorgWarner Inc has been generating more revenue for each dollar invested in fixed assets, indicating improved efficiency in utilizing its long-term assets such as property, plant, and equipment.
On the other hand, the total asset turnover ratio has also exhibited an increasing trend over the same period, rising from 1.05 in 2019 to 0.98 in 2023. This indicates that the company is generating more revenue for each dollar of total assets held, demonstrating improved efficiency in utilizing all its assets, including both current and long-term assets.
Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios signifies that BorgWarner Inc has been effectively managing and utilizing its long-term assets to generate revenue, which can be indicative of operational efficiency and potentially improved profitability.