Dow Inc (DOW)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 6.97 | 7.24 | 6.28 | 5.85 | 5.90 |
| Receivables turnover | 6.75 | 7.34 | 5.75 | 5.22 | 5.69 |
| Payables turnover | 6.69 | 7.01 | 5.50 | 5.66 | 6.16 |
| Working capital turnover | 5.83 | 6.22 | 7.21 | 4.83 | 7.00 |
The inventory turnover ratio for Dow Inc has been relatively stable over the past five years, fluctuating between 5.85 and 6.92, indicating that the company efficiently manages its inventory. The receivables turnover ratio has also shown consistency, with a slight decrease in 2023 compared to the previous year, suggesting that the company is efficient in collecting outstanding receivables from its customers.
Similarly, the payables turnover ratio has been fairly steady, reflecting the company's ability to effectively manage its trade credit, although a slight decrease is observed in 2021. The working capital turnover ratio has exhibited more fluctuation, with a notable decrease in 2020 followed by a rebound in 2021, indicating changes in the company's efficiency in utilizing its working capital to generate sales.
Overall, Dow Inc has generally demonstrated strong efficiency in managing its inventory, receivables, payables, and working capital over the past five years, reflecting robust operational management practices.
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 | 52.39 | 50.43 | 58.11 | 62.40 | 61.87 |
| Days of sales outstanding (DSO) | days | 54.10 | 49.74 | 63.44 | 69.98 | 64.20 |
| Number of days of payables | days | 54.55 | 52.08 | 66.34 | 64.46 | 59.28 |
Certainly, to assess Dow Inc's efficiency in managing its inventory, accounts receivable, and accounts payable, let's analyze the activity ratios provided.
Days of Inventory on Hand (DOH):
The trend in DOH shows a fluctuating pattern, with the highest level in 2021 and the lowest in 2022. It indicates that in 2021, Dow Inc required more days to sell its inventory, potentially a signal of overstocking or slower inventory turnover.
Days of Sales Outstanding (DSO):
The DSO trend indicates a decreasing pattern from 2019 to 2021, which suggests an improvement in the collection of receivables. However, there was an increase in 2023, indicating a potential slowdown in collecting revenue from sales.
Number of Days of Payables:
The trend in payables days also shows variability, with the highest level in 2021 and a decrease in 2022. A higher number of days of payables may signify a favorable situation, providing Dow Inc with more time to settle its obligations to suppliers.
Overall, by comparing these activity ratios, it is observed that while the company has made some improvements in managing its accounts receivable and payables, there are fluctuations in the inventory management process. This could be an area of focus for the company to ensure optimal use of resources and working capital.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.12 | 2.78 | 2.67 | 1.90 | 2.05 |
| Total asset turnover | 0.77 | 0.94 | 0.87 | 0.63 | 0.71 |
The fixed asset turnover ratio for Dow Inc has shown a decreasing trend over the past five years, from 2.78 in 2019 to 2.12 in 2023. This indicates that the company's efficiency in generating sales from its fixed assets has declined. However, it is important to note that the ratio remained above 1.0 throughout the period, suggesting that the company is effectively utilizing its fixed assets to generate sales.
In contrast, the total asset turnover ratio has also exhibited a decreasing trend, decreasing from 0.94 in 2019 to 0.77 in 2023. This implies that Dow Inc's efficiency in generating sales from its total assets has also declined over the past five years. The ratio consistently remained below 1.0, suggesting that the company may not be effectively leveraging its total assets to generate sales.
Overall, the long-term activity ratios indicate a decline in the efficiency of Dow Inc in generating sales from both its fixed assets and total assets. This trend may warrant further investigation into the company's asset management and utilization strategies.