Caterpillar Inc (CAT)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 2.58 | 2.54 | 2.53 | 2.55 | 3.25 |
| Receivables turnover | 3.56 | 3.33 | 2.93 | 2.49 | 7.03 |
| Payables turnover | 5.41 | 4.76 | 4.36 | 4.75 | 6.15 |
| Working capital turnover | 5.49 | 4.85 | 3.75 | 3.04 | 4.28 |
Inventory turnover measures how efficiently Caterpillar Inc. is managing its inventory. Over the past five years, the inventory turnover ratio has been relatively consistent, ranging from 2.53 to 3.25 times. This implies that Caterpillar is able to sell and replace its inventory between 2.53 to 3.25 times per year.
Receivables turnover indicates how quickly Caterpillar collects its accounts receivable. The ratio has been improving steadily over the years, ranging from 5.71 to 7.20 times. This suggests that Caterpillar is collecting its receivables faster, which is a positive sign of efficient cash flow management.
Payables turnover measures how quickly Caterpillar pays its suppliers. The ratio has fluctuated over the years, ranging from 4.36 to 6.15 times. A higher payables turnover ratio indicates that Caterpillar is taking longer to pay its bills, which could be beneficial for managing cash flow and working capital.
The working capital turnover ratio is not provided for all years, indicating a lack of information on how efficiently Caterpillar is utilizing its working capital to generate sales revenue.
Overall, the activity ratios of Caterpillar Inc. show varying levels of efficiency in managing inventory, collecting receivables, and paying suppliers over the years. These ratios provide insights into the company's operational performance and financial management strategies.
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 | 141.38 | 143.62 | 144.28 | 143.10 | 112.26 |
| Days of sales outstanding (DSO) | days | 102.44 | 109.75 | 124.42 | 146.71 | 51.89 |
| Number of days of payables | days | 67.47 | 76.70 | 83.81 | 76.91 | 59.36 |
The activity ratios of Caterpillar Inc. provide insights into the company's efficiency in managing its inventory, collecting receivables, and paying its suppliers.
1. Days of Inventory on Hand (DOH): This ratio indicates the number of days it takes for Caterpillar to sell its inventory. Over the past five years, the trend shows a slight increase in the number of days inventory is held, from 112.26 days in 2019 to 141.38 days in 2023. This may suggest a slower turnover of inventory, which could tie up working capital and potentially lead to higher holding costs.
2. Days of Sales Outstanding (DSO): DSO reflects how efficiently Caterpillar collects its accounts receivable. The trend in DSO over the years has shown some fluctuations, with a decrease from 63.97 days in 2020 to 50.67 days in 2023. A lower DSO indicates a quicker collection of receivables, which is generally favorable as it improves cash flow and reduces the risk of bad debt.
3. Number of Days of Payables: This ratio measures how long Caterpillar takes to pay its suppliers. The trend in the number of days of payables has shown fluctuations over the years, with an increase from 59.36 days in 2019 to 67.47 days in 2023. A longer time taken to pay suppliers may indicate better cash flow management, but it could also potentially strain supplier relationships if delayed payments become a norm.
In conclusion, while Caterpillar Inc. has shown some fluctuations in its activity ratios over the years, the company may benefit from focusing on optimizing its inventory turnover, maintaining timely collection of receivables, and managing its payables effectively to enhance overall operational efficiency and financial performance.
See also:
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.29 | 4.94 | 4.22 | 3.37 | 4.17 |
| Total asset turnover | 0.77 | 0.73 | 0.62 | 0.53 | 0.69 |
Caterpillar Inc.'s fixed asset turnover has shown a consistent upward trend from 2019 to 2023, indicating that the company has been able to generate more sales revenue per dollar of fixed assets invested. This improvement suggests an efficient utilization of its fixed assets over time. The latest fixed asset turnover of 5.29 in 2023 reflects a significant increase compared to the ratio of 4.17 in 2019.
On the other hand, the total asset turnover has also been increasing steadily over the years, implying that Caterpillar Inc. has been improving its overall efficiency in generating sales in relation to its total assets. The latest total asset turnover of 0.77 in 2023 marks a notable enhancement compared to the ratio of 0.69 in 2019.
Overall, the increasing trends in both fixed asset turnover and total asset turnover ratios indicate that Caterpillar Inc. has effectively managed its asset base to generate more revenue relative to its asset investments, reflecting operational efficiency and effective asset utilization over the years.