BorgWarner Inc (BWA)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 9.14 | 8.86 | 10.44 | 7.81 | 6.42 |
| Receivables turnover | 4.95 | 4.57 | 5.11 | 5.12 | 3.48 |
| Payables turnover | — | — | 4.73 | 5.26 | — |
| Working capital turnover | 4.90 | 5.80 | 5.31 | 5.30 | 4.31 |
Based on the provided data for BorgWarner Inc's activity ratios, we can analyze the company's efficiency in managing its inventory, receivables, payables, and working capital over the years.
1. Inventory Turnover: The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a certain period. BorgWarner Inc's inventory turnover has been steadily increasing from 6.42 in 2020 to 9.14 in 2024. This indicates that the company is managing its inventory more efficiently, selling products faster, or maintaining leaner inventory levels.
2. Receivables Turnover: The receivables turnover ratio shows how efficiently a company collects payments from its customers. BorgWarner Inc's receivables turnover has fluctuated over the years but generally improved from 3.48 in 2020 to 4.95 in 2024. This suggests that the company has been more effective in collecting payments from customers.
3. Payables Turnover: The payables turnover ratio reflects how quickly a company pays its suppliers. Data for BorgWarner Inc shows some missing values, indicating that payables turnover might not be calculated for those years. However, in years where data is available, the payables turnover has declined, which could imply that the company is taking longer to pay its suppliers.
4. Working Capital Turnover: The working capital turnover ratio measures how effectively a company is using its working capital to generate sales. BorgWarner Inc's working capital turnover has shown fluctuations but has increased overall from 4.31 in 2020 to 4.90 in 2024. This suggests that the company is generating more sales relative to its working capital, indicating improved efficiency.
Overall, BorgWarner Inc has demonstrated improvements in managing its inventory, receivables, and working capital efficiency over the years, which is generally favorable for the company's operational performance and financial health. However, the declining trend in payables turnover may require further examination to understand its implications on the company's cash flow management and relationships with suppliers.
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 | 39.92 | 41.21 | 34.98 | 46.73 | 56.86 |
| Days of sales outstanding (DSO) | days | 73.67 | 79.93 | 71.38 | 71.29 | 104.81 |
| Number of days of payables | days | — | — | 77.14 | 69.33 | — |
Based on the provided data for BorgWarner Inc, let's analyze the activity ratios:
1. Days of Inventory on Hand (DOH):
- December 31, 2020: 56.86 days
- December 31, 2021: 46.73 days
- December 31, 2022: 34.98 days
- December 31, 2023: 41.21 days
- December 31, 2024: 39.92 days
The trend in the Days of Inventory on Hand shows a decrease over the years, indicating that BorgWarner Inc has been managing its inventory more efficiently. A lower number of days in inventory suggests that the company is selling its products rapidly and may be effectively managing its production levels.
2. Days of Sales Outstanding (DSO):
- December 31, 2020: 104.81 days
- December 31, 2021: 71.29 days
- December 31, 2022: 71.38 days
- December 31, 2023: 79.93 days
- December 31, 2024: 73.67 days
The Days of Sales Outstanding ratio shows the average number of days it takes for BorgWarner Inc to collect revenue after a sale. The decreasing trend in this ratio indicates that the company has been collecting its accounts receivable faster, which is a positive sign of efficient credit management and timely collection of sales proceeds.
3. Number of Days of Payables:
- December 31, 2020: Not provided
- December 31, 2021: 69.33 days
- December 31, 2022: 77.14 days
- December 31, 2023: Not provided
- December 31, 2024: Not provided
The Days of Payables ratio represents the average number of days BorgWarner Inc takes to pay its suppliers. The data suggests that the company has been taking more time to pay its payables over the years, which might indicate a more extended period of credit taken from suppliers.
In conclusion, BorgWarner Inc's activity ratios show improvements in inventory management and accounts receivable collection efficiency. However, the trend in the days of payables indicates a potential extension in payment terms to suppliers.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.96 | 3.78 | 3.70 | 3.38 | 2.22 |
| Total asset turnover | 1.01 | 0.98 | 0.74 | 0.90 | 0.63 |
The fixed asset turnover ratio measures the efficiency of a company in generating sales revenue from its investments in fixed assets. BorgWarner Inc's fixed asset turnover has shown a steady increase from 2.22 in 2020 to 3.96 in 2024. This improvement indicates that the company is utilizing its fixed assets more effectively over the years, generating more sales for every dollar invested in fixed assets.
On the other hand, the total asset turnover ratio assesses the company's ability to generate sales revenue relative to its total assets. BorgWarner Inc's total asset turnover fluctuates over the years, with a significant increase from 0.63 in 2020 to 1.01 in 2024. This suggests that the company has been able to generate more sales revenue per dollar of total assets, reflecting improved efficiency in asset utilization.
In summary, BorgWarner Inc has shown improvement in both its fixed asset turnover and total asset turnover ratios over the years. This indicates increasing efficiency in utilizing its assets to generate sales revenue, which bodes well for the company's long-term operational performance and financial health.