Cummins Inc (CMI)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Inventory turnover	4.55	4.27	4.08	3.90	3.81	3.60	3.95	4.05	4.21	4.23	4.29	4.21	4.36	4.24	4.16	4.70	5.05	4.69	4.63	4.66
Receivables turnover	420.56	—	—	64.27	61.16	74.94	86.37	60.94	45.67	—	—	—	4.96	58.04	54.33	83.31	6.10	6.13	5.81	6.01
Payables turnover	6.06	5.92	5.70	4.95	5.02	4.98	5.52	5.31	6.07	5.69	5.51	4.82	5.29	5.67	6.67	6.36	6.94	6.33	6.03	6.01
Working capital turnover	14.84	6.96	7.38	8.75	9.27	6.76	4.87	4.78	4.60	4.40	4.35	3.82	3.56	3.65	6.93	8.04	7.54	6.89	5.84	6.61

Cummins Inc.'s activity ratios provide insights into the efficiency of the company's operations and management of its resources.

1. Inventory turnover: The inventory turnover ratio indicates how many times Cummins Inc. sells and replaces its inventory during a specific period. The trend shows an improvement, with the ratio gradually increasing from 3.81 in Q4 2022 to 4.55 in Q4 2023. This signifies that the company is managing its inventory more effectively and turning over its stock at a faster rate.

2. Receivables turnover: The receivables turnover ratio measures how efficiently Cummins Inc. collects outstanding receivables. The ratio has been relatively stable over the periods, ranging between 5.17 and 6.10. A higher turnover ratio implies that the company is collecting its receivables quickly, which is favorable for cash flow management.

3. Payables turnover: The payables turnover ratio evaluates how quickly Cummins Inc. pays its suppliers. The ratio has also been consistent, staying between 4.95 and 6.06. A higher payables turnover suggests that the company is efficiently managing its payables and optimizing its working capital.

4. Working capital turnover: The working capital turnover ratio assesses how effectively Cummins Inc. utilizes its working capital to generate sales. The ratio has shown fluctuations, with a notable increase in Q4 2023. A higher working capital turnover indicates that the company is effectively leveraging its current assets to drive revenue.

Overall, the activity ratios of Cummins Inc. suggest that the company is efficiently managing its inventory, receivables, payables, and working capital to support its operational activities and financial performance.

Average number of days

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	80.26	85.46	89.57	93.58	95.77	101.48	92.51	90.12	86.74	86.38	85.13	86.67	83.81	86.08	87.66	77.59	72.33	77.89	78.90	78.35
Days of sales outstanding (DSO)	days	0.87	—	—	5.68	5.97	4.87	4.23	5.99	7.99	—	—	—	73.55	6.29	6.72	4.38	59.79	59.53	62.79	60.70
Number of days of payables	days	60.23	61.67	64.03	73.81	72.68	73.23	66.11	68.72	60.17	64.16	66.25	75.72	69.00	64.43	54.71	57.41	52.58	57.69	60.57	60.74

To analyze the activity ratios of Cummins Inc. based on the provided data:

1. Days of Inventory on Hand (DOH):
- Cummins Inc.'s DOH has shown a fluctuating trend over the past eight quarters, ranging from 80.26 days to 101.48 days.
- The company appears to have effectively managed its inventory in Q4 2023 compared to previous quarters, with the lowest DOH in the last two years.
- A decreasing trend in DOH indicates that the company is selling goods more quickly or managing its inventory efficiently.

2. Days of Sales Outstanding (DSO):
- Cummins Inc.'s DSO has also varied over the past eight quarters, with values ranging from 59.82 days to 70.65 days.
- The DSO increased in Q4 2023 compared to the previous quarter, indicating that customers may be taking longer to pay for goods and services.
- A higher DSO may suggest potential liquidity challenges or credit management issues that the company needs to address.

3. Number of Days of Payables:
- The number of days of payables for Cummins Inc. has been relatively stable, fluctuating between 60.23 days and 73.81 days over the past two years.
- Q1 2023 saw the highest number of days of payables in the provided data, indicating potentially stretched payment terms with suppliers during that quarter.
- An increasing trend in the number of days of payables could indicate either favorable credit terms with suppliers or potential cash flow challenges.

In conclusion, an analysis of Cummins Inc.'s activity ratios reveals fluctuating trends in inventory management, accounts receivable collection, and accounts payable. It is important for the company to continue monitoring these ratios to ensure efficient operations, cash flow management, and working capital optimization.

Long-term

	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Fixed asset turnover	5.45	5.74	5.63	5.39	5.08	5.03	5.65	5.55	5.43	5.74	5.55	4.98	4.66	4.79	4.97	5.47	5.55	5.95	5.96	5.95
Total asset turnover	1.06	1.04	1.01	0.96	0.93	0.88	1.01	1.01	1.01	1.04	1.02	0.91	0.88	0.91	0.99	1.12	1.19	1.19	1.20	1.22

Cummins Inc.'s fixed asset turnover has remained relatively stable over the past eight quarters, ranging from 5.03 to 5.74. This ratio indicates that the company generates between 5.03 and 5.74 in revenue for every dollar invested in fixed assets. The consistent high values imply that Cummins efficiently utilizes its fixed assets to generate sales.

In terms of total asset turnover, Cummins Inc. has shown a gradual improvement from 0.88 to 1.06 over the same period. This suggests that the company is becoming more efficient in generating revenue from its total assets. The increasing trend indicates that Cummins is better utilizing all its assets to drive sales. Overall, both the fixed asset turnover and total asset turnover ratios show that Cummins Inc. is effectively managing its assets to generate sales revenue.