The Clorox Company (CLX)

Short-term

Turnover ratios

The activity ratios of The Clorox Company provide valuable insights into the efficiency of its operations and management of working capital.

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory during a period.
- Over the past five years, Clorox's inventory turnover has been relatively stable, with a range from 7.36 to 10.24.
- A higher inventory turnover signifies that Clorox is efficiently managing its inventory levels, turning over its stock more frequently.

2. Receivables Turnover:
- The receivables turnover ratio indicates how efficiently a company collects on its credit sales.
- Clorox has maintained a consistently high receivables turnover ratio over the past five years, ranging from 10.17 to 11.97.
- This indicates that Clorox is effective in collecting payments from its customers in a timely manner.

3. Payables Turnover:
- The payables turnover ratio reflects how quickly a company pays its suppliers.
- Clorox's payables turnover has remained relatively stable, ranging from 5.56 to 8.08 over the past five years.
- A lower payables turnover ratio suggests that Clorox takes more time to pay its suppliers, possibly benefiting from extended payment terms.

4. Working Capital Turnover:
- The working capital turnover ratio measures how efficiently a company utilizes its working capital to generate sales.
- Clorox's working capital turnover was substantially high at 147.25 in 2024, indicating that the company generated significant sales revenue relative to its working capital.
- However, the absence of data for previous years limits the ability to make year-over-year comparisons.

Overall, the analysis of Clorox's activity ratios suggests that the company effectively manages its inventory, accounts receivable, and accounts payable, resulting in efficient use of working capital to drive sales and maintain operations.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities. Let's analyze The Clorox Company's activity ratios based on the provided data for the past five years.

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. A lower DOH is generally more favorable as it suggests faster inventory turnover.
- The company's DOH has fluctuated over the past five years, ranging from 35.66 days in 2020 to 49.81 days in 2021.
- In 2024, the DOH increased to 44.03 days compared to the previous year, indicating a slight decrease in inventory turnover efficiency.

2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes for the company to collect payment after making a sale. A lower DSO is preferable as it signifies quicker cash collection.
- The company's DSO has exhibited some variability, with the lowest DSO of 30.48 days in 2021 and the highest DSO of 35.89 days in 2024.
- In 2024, the DSO increased to 35.89 days, suggesting a longer collection period compared to the previous year and potentially impacting cash flow.

3. Number of Days of Payables:
- This ratio reflects the average number of days it takes for the company to pay its suppliers. A higher number of days of payables typically indicates that the company is taking longer to settle its payables.
- The Clorox Company has seen an upward trend in the number of days of payables over the last five years, from 45.16 days in 2020 to 65.66 days in 2024.
- The increase in the number of days of payables suggests a lengthening of the payment period, which may be a strategic move to manage cash flow or negotiate more favorable payment terms with suppliers.

In conclusion, while The Clorox Company's activity ratios have shown some fluctuations over the years, there are signs of a slight decrease in inventory turnover efficiency and an increase in the collection period and payment period in 2024. It is essential for the company to continuously monitor and manage these ratios to ensure operational efficiency and financial health.

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Long-term

The long-term activity ratios of The Clorox Company indicate the efficiency of utilizing its assets over the past five years. The fixed asset turnover ratio has been relatively stable, ranging from 5.25 to 6.00. This suggests that Clorox is generating between $5.25 and $6.00 in sales for every dollar invested in fixed assets, indicating strong efficiency in utilizing its property, plant, and equipment.

On the other hand, the total asset turnover ratio has also remained consistent at around 1.14 to 1.23. This implies that, on average, Clorox is generating approximately $1.14 to $1.23 in sales for every dollar of total assets. The consistency of this ratio indicates that Clorox has been efficient in utilizing all of its assets, including both fixed and current assets, to generate revenue.

Overall, the stability and relatively high values of both the fixed asset turnover and total asset turnover ratios suggest that Clorox has been effectively managing its assets to drive sales and generate revenue over the analyzed period. This efficient asset utilization is a positive indicator of the company's operational performance and management of its resources.