Cummins Inc (CMI)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.47 | 4.55 | 3.81 | 4.21 | 4.36 |
| Receivables turnover | 281.83 | 420.56 | 61.16 | 45.67 | 4.96 |
| Payables turnover | 6.50 | 6.06 | 5.02 | 6.07 | 5.29 |
| Working capital turnover | 9.69 | 14.84 | 9.27 | 4.60 | 3.56 |
Cummins Inc's activity ratios demonstrate the efficiency of the company in managing its assets and operations.
1. Inventory Turnover: The inventory turnover ratio indicates that Cummins Inc effectively manages its inventory levels, with a slight decrease from 4.36 in 2020 to 3.81 in 2022, but then improving to 4.47 in 2024. This suggests that the company is selling and replenishing its inventory at a steady pace.
2. Receivables Turnover: The receivables turnover ratio shows a significant increase from 4.96 in 2020 to 281.83 in 2024. This indicates that Cummins Inc has been collecting its accounts receivable much faster over the years, which is a positive sign of effective credit management.
3. Payables Turnover: The payables turnover ratio remained relatively stable over the years, ranging from 5.02 in 2022 to 6.50 in 2024. This suggests that Cummins Inc maintains good relationships with its suppliers and effectively manages its accounts payable.
4. Working Capital Turnover: The working capital turnover ratio shows a general increasing trend from 3.56 in 2020 to 9.69 in 2024. This indicates that Cummins Inc is generating more revenue relative to its working capital, demonstrating efficient utilization of its operating resources.
Overall, the activity ratios of Cummins Inc reflect strong operational efficiency and effective management of its assets and resources over the years.
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 | 81.67 | 80.26 | 95.77 | 86.74 | 83.81 |
| Days of sales outstanding (DSO) | days | 1.30 | 0.87 | 5.97 | 7.99 | 73.55 |
| Number of days of payables | days | 56.19 | 60.23 | 72.68 | 60.17 | 69.00 |
Based on the provided data on activity ratios for Cummins Inc, we can observe the following trends:
1. Days of Inventory on Hand (DOH):
- The DOH has shown an increasing trend from 83.81 days in 2020 to 95.77 days in 2022, indicating that Cummins Inc is holding inventory for a longer period.
- However, there was a slight decrease in DOH in 2023 and 2024, possibly indicating improved inventory management efficiency.
2. Days of Sales Outstanding (DSO):
- The DSO experienced a significant decrease from 73.55 days in 2020 to 0.87 days in 2023, implying Cummins Inc is collecting sales revenue more rapidly.
- There was a slight increase in DSO in 2024 to 1.30 days, but it still remains very low compared to previous years, indicating efficient collection processes.
3. Number of Days of Payables:
- The number of days of payables has fluctuated over the years, with a general declining trend from 69.00 days in 2020 to 56.19 days in 2024.
- A decreasing trend in payables days suggests that Cummins Inc is paying its suppliers more rapidly, potentially improving relationships and cash management.
Overall, Cummins Inc appears to have made improvements in its inventory management, sales collection efficiency, and payables management over the years, which can positively impact its working capital and cash flow.
See also:
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.37 | 5.45 | 5.08 | 5.43 | 4.66 |
| Total asset turnover | 1.08 | 1.06 | 0.93 | 1.01 | 0.88 |
Cummins Inc's fixed asset turnover ratio, which measures the efficiency of the company in generating sales from its fixed assets, has shown a steady improvement over the five-year period. The ratio increased from 4.66 in 2020 to 5.37 in 2024, indicating that Cummins is effectively utilizing its fixed assets to generate revenue.
In terms of total asset turnover, which measures the company's ability to generate sales from its total assets, Cummins also demonstrated positive performance. The total asset turnover ratio increased from 0.88 in 2020 to 1.08 in 2024. This improvement suggests that Cummins has been able to generate more sales relative to its total assets over the years.
Overall, both the fixed asset turnover and total asset turnover ratios for Cummins Inc have shown positive trends, indicating the company's efficiency in utilizing its assets to drive revenue growth. This suggests effective management of assets and operations to maximize sales and improve overall performance.