Eastman Chemical Company (EMN)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.25 | 4.46 | 5.30 | 4.71 | 4.24 |
| Receivables turnover | 10.37 | 10.67 | 8.29 | 6.30 | 7.79 |
| Payables turnover | 4.96 | 5.25 | 5.27 | 6.18 | 6.02 |
| Working capital turnover | 10.18 | 20.08 | 6.25 | 5.64 | 6.05 |
Inventory turnover indicates how efficiently a company manages its inventory. Eastman Chemical Co's inventory turnover has been relatively stable over the years, with a range between 4.24 and 5.30. This suggests that the company is effectively managing its inventory levels and converting them into sales.
Receivables turnover measures how well a company collects its outstanding accounts receivable. Eastman Chemical Co's receivables turnover has shown some variability but generally improved over the years, indicating that the company is collecting its receivables more efficiently.
Payables turnover reflects how quickly a company pays its suppliers. Eastman Chemical Co's payables turnover has fluctuated but remained within a moderate range, suggesting a consistent payment policy with its suppliers.
Working capital turnover assesses how efficiently a company utilizes its working capital to generate sales. Eastman Chemical Co's working capital turnover has varied significantly over the years. The notably high figure in 2022 may indicate improved efficiency in utilizing working capital to drive sales, while the figures in other years show more modest efficiency levels.
Overall, Eastman Chemical Co's activity ratios reflect a generally efficient management of inventory, receivables, payables, and working capital over the years, with some fluctuations in performance levels.
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 | 85.93 | 81.88 | 68.83 | 77.46 | 86.18 |
| Days of sales outstanding (DSO) | days | 35.19 | 34.22 | 44.04 | 57.90 | 46.88 |
| Number of days of payables | days | 73.52 | 69.47 | 69.24 | 59.04 | 60.67 |
To evaluate Eastman Chemical Co's activity ratios, we will analyze the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables for the years 2019 to 2023.
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. The increase in DOH from 2019 (86.18 days) to 2023 (85.93 days) suggests a slower turnover of inventory over the years.
- A higher DOH may imply excess stock and potential obsolescence issues, impacting liquidity and profitability if not managed efficiently.
2. Days of sales outstanding (DSO):
- DSO reflects the average number of days it takes for the company to collect revenue after making a sale. The decrease in DSO from 2019 (54.12 days) to 2023 (45.73 days) indicates an improvement in collecting receivables promptly.
- A lower DSO signifies effective credit management, quicker cash inflows, and improved working capital efficiency.
3. Number of days of payables:
- This ratio measures the average number of days it takes the company to pay its suppliers. The increase in days of payables from 2019 (46.15 days) to 2023 (59.74 days) suggests the company is taking longer to settle its payables.
- Extending payment periods can positively impact cash flow and liquidity in the short term, but may strain relationships with suppliers in the long run.
Overall, Eastman Chemical Co's activity ratios reflect a mixed performance in managing inventory, receivables, and payables over the years. Analyzing these ratios in conjunction with profitability and liquidity metrics can provide a more holistic view of the company's operational efficiency and financial health.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 1.66 | 2.05 | 2.10 | 1.53 | 1.66 |
| Total asset turnover | 0.63 | 0.72 | 0.68 | 0.53 | 0.58 |
The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate revenue. Eastman Chemical Co's fixed asset turnover has been fluctuating over the past five years, ranging from 1.53 to 2.10. A higher fixed asset turnover indicates better utilization of fixed assets to generate sales.
On the other hand, the total asset turnover ratio reflects the company's overall efficiency in generating sales from all its assets. Eastman Chemical Co's total asset turnover has also shown variability, with values ranging from 0.53 to 0.72. A higher total asset turnover signifies that the company is effectively using its total assets to generate sales.
Comparing the two ratios, we see that Eastman Chemical Co has a higher fixed asset turnover compared to its total asset turnover for each year. This suggests that the company is more efficient in utilizing its fixed assets to generate revenue than its total assets. Overall, the company's ability to generate sales from both fixed and total assets has shown some improvement over the years, indicating better operational efficiency and asset utilization.