Commercial Metals Company (CMC)

Short-term

Turnover ratios

Firstly, let's analyze the Inventory turnover ratio. The Inventory turnover ratio for Commercial Metals Company has been fairly consistent over the past five years, ranging between 6.52 and 8.14. This indicates that the company is efficient in managing its inventory levels, as it is able to sell and replace its inventory multiple times within a year.

Moving on to the Receivables turnover ratio, we see a slight fluctuation over the years, ranging from 6.03 to 7.06. This ratio measures how efficiently the company is collecting its outstanding receivables. A higher turnover ratio suggests that the company is collecting its receivables quickly.

Next, the Payables turnover ratio has been increasing steadily over the years, from 13.63 to 21.07. A higher Payables turnover ratio means that the company is taking less time to pay its suppliers, which could indicate good relationships with suppliers or effective cash management strategies.

Lastly, the Working capital turnover ratio shows a fluctuating trend over the five-year period. The ratio ranges from 3.21 to 4.38, showing how efficiently the company is utilizing its working capital to generate sales revenue. A higher turnover ratio indicates more efficient use of working capital.

Overall, based on the activity ratios analyzed, Commercial Metals Company appears to be effectively managing its inventory, collecting receivables, paying its suppliers promptly, and utilizing its working capital efficiently to generate sales.

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Average number of days

The Days of Inventory on Hand (DOH) for Commercial Metals Company has shown a decreasing trend over the past five years, indicating that the company has become more efficient in managing its inventory levels. This could be a positive sign as lower DOH suggests a quicker turnover of inventory, allowing the company to reduce holding costs and potential obsolescence.

The Days of Sales Outstanding (DSO) has fluctuated slightly over the years but has remained relatively stable. This metric measures how long it takes for the company to collect on its sales, and a consistent DSO implies that Commercial Metals Company has been effective in its credit and collection policies.

The Number of Days of Payables has seen some variation, with a noticeable decrease in 2021 followed by a slight increase in 2022. A lower number of days of payables indicates that the company is paying its suppliers more quickly, which could potentially strain its cash flow. Conversely, a higher number of days of payables can suggest better cash management by extending payment terms.

Overall, the activity ratios of Commercial Metals Company suggest improvements in inventory management efficiency and stable performance in accounts receivable management. However, fluctuations in the number of days of payables could require closer attention to ensure a balance between cash flow optimization and maintaining vendor relationships.

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Long-term

The long-term activity ratios of Commercial Metals Company show the company's efficiency in utilizing its assets over the past five years.

1. Fixed Asset Turnover: This ratio measures how efficiently the company is using its fixed assets to generate sales. A higher fixed asset turnover ratio indicates that the company is effectively utilizing its investments in long-term assets to generate revenue. Over the period from 2020 to 2024, Commercial Metals Company's fixed asset turnover ratio decreased from 3.45 to 3.06. This decline suggests that the company may be experiencing challenges in maximizing the productivity of its fixed assets to drive sales. However, the ratio remains relatively stable, indicating that the company is managing its fixed assets effectively.

2. Total Asset Turnover: The total asset turnover ratio reflects the company's ability to generate sales from its total assets. A higher total asset turnover ratio signifies that the company is efficiently using its assets to generate revenue. Commercial Metals Company's total asset turnover ratio fluctuated between 1.33 in 2020 and 1.46 in 2022, before decreasing to 1.16 in 2024. The decreasing trend in total asset turnover may indicate challenges in maximizing sales from the company's total asset base or potential inefficiencies in asset usage. However, the company's ability to generate sales from its total assets remains reasonable, as evidenced by the ratios exceeding 1.

In summary, while the fixed asset turnover ratio shows a slight decline over the period, the total asset turnover ratio fluctuates but generally remains above 1, indicating that Commercial Metals Company continues to effectively utilize its assets to generate revenue, although there may be room for improvement in optimizing asset utilization for increased profitability.