Cleveland-Cliffs Inc (CLF)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.81 | 4.12 | 3.18 | 1.44 | 4.46 |
| Receivables turnover | 11.95 | 11.73 | 9.48 | 4.49 | 13.04 |
| Payables turnover | 10.22 | 9.66 | 7.95 | 3.50 | 7.33 |
| Working capital turnover | 7.03 | 5.94 | 5.00 | 2.26 | 4.07 |
Inventory turnover: The inventory turnover ratio measures how efficiently a company manages its inventory by showing how many times a company sells and replaces its average inventory during a period. Cleveland-Cliffs Inc's inventory turnover has shown fluctuation over the past five years, with a notable decrease in 2020 followed by a significant increase in 2023, indicating a more efficient management of inventory in recent years.
Receivables turnover: The receivables turnover ratio reflects how many times a company collects its accounts receivable during a period. Cleveland-Cliffs Inc has consistently maintained a high receivables turnover ratio over the past five years, indicating that the company efficiently collects outstanding receivables, with a slight decrease in 2021 compared to 2019 and 2020 but a recovery in 2022 and a further increase in 2023.
Payables turnover: The payables turnover ratio demonstrates how many times a company pays its suppliers during a period. Cleveland-Cliffs Inc has shown a stable payables turnover ratio over the past five years, reflecting consistent payment practices in managing its accounts payable, with a notable increase in 2020 followed by slight fluctuations in subsequent years.
Working capital turnover: The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate revenue. Cleveland-Cliffs Inc has demonstrated an increasing trend in its working capital turnover ratio over the past five years, indicating a better utilization of working capital to generate sales, with notable improvements in 2022 and 2023 compared to previous years.
Overall, the activity ratios of Cleveland-Cliffs Inc suggest improvements in managing inventory, collecting receivables, paying suppliers, and utilizing working capital efficiently, which reflects positively on the company's operational efficiency and financial performance over the years.
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 | 75.89 | 88.70 | 114.95 | 253.53 | 81.81 |
| Days of sales outstanding (DSO) | days | 30.53 | 31.12 | 38.51 | 81.33 | 27.99 |
| Number of days of payables | days | 35.72 | 37.79 | 45.93 | 104.31 | 49.81 |
To analyze Cleveland-Cliffs Inc's activity ratios, we will focus on Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.
1. Days of Inventory on Hand (DOH):
- A lower DOH indicates that the company is selling inventory more quickly, which is favorable as it reduces holding costs and the risk of inventory obsolescence.
- Cleveland-Cliffs Inc's DOH has fluctuated over the years, reaching a high of 273.86 days in 2020 and then decreasing to 79.01 days in 2023. This improvement suggests better inventory management and efficiency in turning over inventory during the most recent period.
2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect outstanding receivables. A lower DSO indicates faster collection of receivables, which is positive as it boosts cash flow.
- Cleveland-Cliffs Inc's DSO has shown some variability, with a peak of 81.33 days in 2020 and a decrease to 30.53 days in 2023. The reduction in DSO suggests improved receivables collection efficiency in recent years.
3. Number of Days of Payables:
- A higher number of days of payables indicates that the company takes longer to pay its suppliers, which can improve cash flow but may strain relationships with suppliers.
- Cleveland-Cliffs Inc's days of payables have fluctuated, with a high of 112.68 days in 2020 and a decrease to 37.18 days in 2023. The recent decrease may indicate more timely payments to suppliers.
Overall, Cleveland-Cliffs Inc has shown improvements in its activity ratios over the years, particularly in managing inventory levels more efficiently, collecting receivables faster, and potentially making more timely payments to suppliers. These trends suggest enhanced operational efficiency and cash management within the company, which could support its financial health and performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.47 | 2.53 | 2.23 | 0.61 | 1.03 |
| Total asset turnover | 1.25 | 1.23 | 1.08 | 0.32 | 0.57 |
Cleveland-Cliffs Inc's long-term activity ratios provide insight into the efficiency with which the company utilizes its assets to generate sales. The fixed asset turnover ratio has been relatively stable over the past five years, with a slight decrease in 2023 compared to 2022. This ratio indicates that for every dollar invested in fixed assets, the company is generating $2.47 in sales in 2023.
On the other hand, the total asset turnover ratio has shown an increasing trend over the same period, indicating improved efficiency in asset utilization. In 2023, the company generated $1.25 in sales for every dollar of total assets, compared to $1.23 in 2022. This suggests that Cleveland-Cliffs Inc is becoming more effective in generating revenues from its total asset base.
Overall, both ratios show a positive trend in asset utilization efficiency, particularly the total asset turnover ratio, which indicates that the company is effectively leveraging its assets to generate sales. This improvement in efficiency bodes well for Cleveland-Cliffs Inc's long-term performance and financial health.