Freeport-McMoran Copper & Gold Inc (FCX)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	2.69	3.06	3.29	3.19	3.43
Receivables turnover	13.69	12.66	13.06	10.02	12.32
Payables turnover	6.36	5.59	6.89	7.91	7.94
Working capital turnover	2.77	2.46	2.56	2.41	3.06

Activity ratios provide insight into how effectively a company is managing its assets and operations. Let's analyze Freeport-McMoRan Inc's activity ratios:

1. Inventory Turnover:
Inventory turnover measures how many times a company sells and replaces its inventory during a specific period. Freeport-McMoRan's inventory turnover has been fluctuating but generally decreasing from 2.83 in 2019 to 2.25 in 2023. This suggests that the company is selling its inventory at a slower rate, which may lead to higher carrying costs and potential obsolescence.

2. Receivables Turnover:
Receivables turnover reflects how efficiently a company collects on its credit sales. Freeport-McMoRan's receivables turnover has shown an increasing trend, indicating that the company is becoming more efficient in collecting payments from its customers. The ratio improved from 10.06 in 2020 to 13.73 in 2023.

3. Payables Turnover:
Payables turnover measures how well a company manages its trade credit from suppliers. Freeport-McMoRan's payables turnover has been varying over the years, with a decrease from 6.81 in 2020 to 5.53 in 2023. A lower payables turnover could indicate that the company is taking longer to pay its suppliers, which may impact supplier relationships and cash flow management.

4. Working Capital Turnover:
Working capital turnover assesses how efficiently a company utilizes its working capital to generate sales. Freeport-McMoRan's working capital turnover has been relatively stable over the years, with a slight decrease from 3.06 in 2019 to 2.77 in 2023. A higher working capital turnover signifies that the company is effectively using its working capital to support its operations and generate revenue.

Overall, the analysis of Freeport-McMoRan Inc's activity ratios suggests areas of strength and potential areas for improvement in managing its inventory, receivables, payables, and working capital. Further examination and comparison with industry benchmarks would provide a more comprehensive understanding of the company's operational efficiency.

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	135.81	119.13	111.03	114.50	106.48
Days of sales outstanding (DSO)	days	26.67	28.84	27.94	36.43	29.63
Number of days of payables	days	57.35	65.34	52.94	46.13	46.00

The activity ratios of Freeport-McMoRan Inc provide valuable insights into the efficiency of the company's operations and management of working capital.

1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates that Freeport-McMoRan has been gradually increasing its efficiency in managing inventory over the years, with a noticeable improvement from 2019 to 2021.
- The increase in DOH from 2022 to 2023 may suggest a slight decrease in inventory turnover efficiency; however, the company still maintains a reasonable level of inventory turnover.

2. Days of Sales Outstanding (DSO):
- The DSO metric shows the average number of days it takes for Freeport-McMoRan to collect payment after making a sale.
- A decreasing trend in DSO from 2020 to 2021 and 2022 to 2023 indicates improved accounts receivable management, with the company collecting payments more quickly.

3. Number of Days of Payables:
- The trend in the number of days of payables suggests that Freeport-McMoRan has been extending its payment period to suppliers over the years.
- This could indicate a positive cash flow impact, as the company is taking longer to pay its liabilities.

Overall, the activity ratios for Freeport-McMoRan Inc demonstrate a mixed performance in terms of inventory management, accounts receivable collection, and accounts payable management. The company appears to be making strides in improving efficiency in these areas, which is crucial for optimizing working capital and financial performance.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	0.65	0.70	0.75	0.48	0.49
Total asset turnover	0.44	0.45	0.48	0.34	0.35

Freeport-McMoRan Inc'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 exhibited a decreasing trend over the past five years, declining from 0.49 in 2019 to 0.65 in 2023. This indicates that the company has become less efficient in generating revenue from its fixed assets over time. A lower fixed asset turnover ratio suggests that Freeport-McMoRan Inc may be facing challenges in optimizing the utilization of its fixed assets to drive sales.

Similarly, the total asset turnover ratio has shown a fluctuating pattern, with a slight increase from 0.35 in 2019 to 0.44 in 2023. This indicates that the company's ability to generate revenue from its total assets has improved gradually during the period under review. However, the total asset turnover ratio remains relatively low, signaling that Freeport-McMoRan Inc may need to enhance its asset utilization efficiency further.

In conclusion, while there has been a modest improvement in the total asset turnover ratio, the decreasing trend in the fixed asset turnover ratio suggests that Freeport-McMoRan Inc may need to focus on optimizing the utilization of its fixed assets to enhance its long-term operational efficiency and profitability.