Eaton Corporation PLC (ETN)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	3.95	4.04	4.48	5.88	5.11
Receivables turnover	5.16	5.04	6.10	6.20	6.18
Payables turnover	4.39	4.51	4.75	6.24	6.78
Working capital turnover	5.88	8.62	67.27	5.46	5.90

Eaton Corporation plc's inventory turnover has shown a gradual decline over the past five years, indicating that the company is taking longer to sell its inventory. This may suggest potential issues with inventory management or changing demand dynamics.

The receivables turnover has also experienced a decreasing trend, indicating that it is taking the company slightly longer to collect payments from customers. This could potentially signal a need for tighter credit policies or a change in customer payment behaviors.

On the other hand, the payables turnover ratio has shown fluctuations over the years, with a general decreasing trend. This could indicate that the company is taking longer to pay its suppliers, which may have implications for supplier relationships or cash flow management.

The working capital turnover ratio has fluctuated significantly, with a particularly high value in 2021. This could suggest changes in the efficiency of how the company is utilizing its working capital to generate revenue.

Overall, Eaton Corporation plc may benefit from further analysis and potential adjustments in its inventory, receivables, payables, and working capital management to optimize its operational efficiency and financial performance in the future.

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	92.45	90.30	81.52	62.04	71.41
Days of sales outstanding (DSO)	days	70.69	72.35	59.83	58.86	59.09
Number of days of payables	days	83.20	80.87	76.80	58.45	53.82

To analyze Eaton Corporation plc's activity ratios, we'll look at the days of inventory on hand (DOH), days of sales outstanding (DSO), and the number of days of payables.

1. Days of Inventory on Hand (DOH): The trend indicates an increase in the number of days inventory is held from 2019 to 2023, with a peak in 2023 at 92.45 days. This suggests that Eaton is taking longer to convert its inventory into sales, which could tie up capital and potentially indicate inefficiencies in inventory management.

2. Days of Sales Outstanding (DSO): The DSO trend shows some fluctuations, but generally remained in a range of 58-71 days over the five years. A decrease in DSO indicates that Eaton is collecting its receivables more quickly, which could improve cash flow and reduce the risk of bad debts.

3. Number of Days of Payables: The days of payables trend also shows variability, with a general increase from 2019 to 2023. This increase could indicate that Eaton is taking longer to pay its suppliers, potentially preserving cash but possibly straining supplier relationships.

In summary, Eaton Corporation plc's activity ratios suggest some concerning trends, particularly with the increase in days of inventory on hand and days of payables. These trends may warrant further investigation into inventory management practices and payment terms with suppliers to optimize working capital efficiency.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	6.55	6.54	6.56	6.08	6.07
Total asset turnover	0.60	0.59	0.59	0.57	0.65

Eaton Corporation plc's long-term activity ratios provide insights into the efficiency with which the company utilizes its fixed assets and total assets to generate revenue.

The fixed asset turnover ratio has remained relatively stable over the past five years, ranging from 6.02 to 6.60. This ratio indicates that for each dollar invested in fixed assets, Eaton Corporation plc generates between $6.02 and $6.60 in revenue. The consistent high value of the fixed asset turnover suggests efficient utilization of fixed assets to generate sales.

On the other hand, the total asset turnover ratio has fluctuated between 0.56 and 0.65 over the same period. This ratio indicates how effectively the company generates revenue from its total assets. While the ratio has not shown a clear trend, the values indicate that for each dollar invested in total assets, Eaton Corporation plc generates revenue ranging from $0.56 to $0.65.

Overall, the fixed asset turnover ratio illustrates the efficiency of Eaton Corporation plc in utilizing its fixed assets to generate sales, while the total asset turnover ratio provides a broader perspective on the company's overall asset utilization efficiency.