Emerson Electric Company (EMR)

Activity ratios

Short-term

Turnover ratios

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Inventory turnover	6.40	9.44	7.55	7.48	8.23
Receivables turnover	4.91	5.71	6.15	5.99	6.15
Payables turnover	10.06	12.89	7.34	8.41	8.25
Working capital turnover	1.72	26.92	8.36	5.56	15.80

Emerson Electric Co.'s activity ratios provide insight into the efficiency of its operations. The inventory turnover has declined from 5.62 in 2019 to 3.86 in 2023, indicating a slower rate of inventory turnover. This may suggest that the company is holding its inventory for a longer period, which could tie up its capital.

The receivables turnover has also shown a declining trend, from 6.15 in 2019 to 6.02 in 2023, indicating that it is taking longer to collect its receivables. This could potentially impact the company's cash flow and liquidity.

On the other hand, the payables turnover has improved from 5.63 in 2019 to 6.07 in 2023, indicating that the company is taking less time to pay its suppliers. This may reflect positively on its relationship with creditors and cash management.

The working capital turnover has fluctuated significantly over the years, with a particularly high value of 26.93 in 2022. This could be due to changes in working capital management or business operations. However, the substantial fluctuation may warrant further investigation to understand the underlying reasons.

In conclusion, Emerson Electric Co.'s activity ratios suggest a need for closer monitoring of inventory and receivables management, while also highlighting the positive trend in payables turnover. Further analysis of the working capital turnover's fluctuations may provide valuable insights into the company's overall operational efficiency.

Average number of days

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	57.07	38.66	48.36	48.82	44.36
Days of sales outstanding (DSO)	days	74.30	63.91	59.36	60.93	59.30
Number of days of payables	days	36.28	28.32	49.73	43.43	44.22

To analyze Emerson Electric Co.'s activity ratios, we will focus on the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables.

The days of inventory on hand measures how long it takes for the company to sell its inventory. Emerson Electric Co.'s DOH has increased over the past five years, from 65.00 days in 2019 to 94.62 days in 2023. This indicates that the company may be holding more inventory or experiencing slower sales.

The days of sales outstanding (DSO) indicates the average number of days it takes for the company to collect payment after a sale. Emerson Electric Co.'s DSO has fluctuated moderately over the five-year period, with a slight increase from 55.93 days in 2022 to 60.60 days in 2023. This suggests that the company's accounts receivable turnover has slightly declined.

The number of days of payables measures how long it takes the company to pay its suppliers. Emerson Electric Co.'s payables period has fluctuated over the past five years, with a decrease from 72.09 days in 2021 to 60.14 days in 2023. This indicates that the company has been able to manage its payables more effectively, potentially improving its cash flow and working capital management.

Overall, Emerson Electric Co.'s activity ratios reflect changes in its inventory management, accounts receivable turnover, and payables management over the five-year period. These trends can provide insights into the company's operational efficiency and working capital performance.

Long-term

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Fixed asset turnover	6.40	8.76	4.89	4.55	5.04
Total asset turnover	0.35	0.55	0.74	0.73	0.90

Emerson Electric Co.'s long-term activity ratios, specifically the fixed asset turnover and total asset turnover, indicate the company's effectiveness in utilizing its assets to generate sales.

The fixed asset turnover has shown an increasing trend over the past five years, from 4.55 in 2020 to 6.42 in 2023. This suggests that the company has been improving its efficiency in generating sales from its fixed assets, such as property, plant, and equipment. A higher fixed asset turnover ratio signifies that the company is generating more sales from each dollar invested in fixed assets, indicating operational efficiency and potentially better asset management.

On the other hand, the total asset turnover ratio has displayed a decreasing trend, declining from 0.90 in 2019 to 0.35 in 2023. This indicates that the company’s overall efficiency in generating sales from all assets, including both fixed and current assets, has declined over the years. A decreasing total asset turnover ratio may suggest underutilization of assets and could be a cause for concern, as it indicates that the company is generating fewer sales relative to its total assets.

Overall, while the fixed asset turnover reflects improving efficiency in utilizing fixed assets, the declining trend in the total asset turnover indicates a decrease in the company's ability to generate sales from all of its assets. This trend warrants further investigation into the reasons for the declining total asset turnover and potential strategies to improve asset utilization.