Fortive Corp (FTV)

Short-term

Turnover ratios

Inventory turnover measures how efficiently a company manages its inventory and converts it into sales. In the case of Fortive Corp, the inventory turnover ratio has been relatively stable over the past five years, ranging from 4.38 to 5.68. This indicates that the company is able to sell and replace its inventory efficiently.

Receivables turnover reflects how quickly a company collects cash from its credit sales. Fortive Corp's receivables turnover has shown a consistent improvement over the years, increasing from 5.29 in 2019 to 6.31 in 2023. This suggests that the company is effectively managing its accounts receivable and collecting payments in a timely manner.

Payables turnover indicates how quickly a company pays off its suppliers. Fortive Corp's payables turnover ratio has fluctuated slightly over the years, ranging from 3.95 to 4.75. A higher payables turnover ratio suggests that the company is paying its suppliers more quickly.

Working capital turnover measures how effectively a company generates sales from its working capital. Fortive Corp's working capital turnover has shown significant variability, with a notable decrease from 33.03 in 2019 to 3.23 in 2023. A lower working capital turnover ratio can indicate that the company is not efficiently utilizing its working capital to generate sales.

Overall, Fortive Corp's activity ratios suggest that the company is effectively managing its inventory, improving its collection of accounts receivable, and maintaining reasonable payment terms with its suppliers. However, the significant drop in working capital turnover is a point of concern and may warrant further investigation.

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Average number of days

The activity ratios provide insights into how efficiently Fortive Corp manages its operating cycle.

1. Days of Inventory on Hand (DOH):
- The trend for DOH has been relatively stable over the past five years, ranging between 64.21 to 83.26 days.
- A higher DOH indicates that Fortive takes longer to sell its inventory, which may tie up capital and increase carrying costs.
- The current DOH of 79.30 days suggests that Fortive holds inventory for approximately 79 days before selling it, indicating some room for improvement in inventory management efficiency.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for Fortive to collect its receivables from customers.
- The trend shows a gradual improvement in DSO from 69.04 days in 2019 to 57.82 days in 2023.
- A lower DSO is favorable as it means the company is collecting cash from sales more quickly, improving cash flow and liquidity.

3. Number of Days of Payables:
- The number of days of payables measures how long Fortive takes to pay its suppliers.
- The trend in payables days has been somewhat fluctuating, ranging from 76.77 to 92.35 days over the past five years.
- The current figure of 89.89 days indicates that Fortive takes approximately 90 days to pay its suppliers on average.

Overall, Fortive's activity ratios suggest that there have been improvements in collecting receivables efficiently (lower DSO) but opportunities to optimize inventory management (lower DOH) and potentially enhance supplier payment strategies as well. The company should focus on striking a balance between inventory levels, receivables collection, and payment terms to drive operational efficiency and enhance working capital management.

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Long-term

The long-term activity ratios of Fortive Corp, as indicated by the fixed asset turnover and total asset turnover, show the company's efficiency in generating sales relative to its investment in assets over the past five years.

The fixed asset turnover has been relatively stable over the period, ranging from 10.98 to 14.09, indicating that Fortive is effectively utilizing its fixed assets to generate revenue. A high fixed asset turnover suggests that the company is efficiently managing its long-term assets to generate sales, which is a positive sign for investors and creditors.

On the other hand, the total asset turnover has also shown consistency, albeit at a lower level compared to the fixed asset turnover. It has ranged from 0.29 to 0.42 over the last five years, indicating that Fortive is generating sales relative to its total assets at a slower pace. Although lower than the fixed asset turnover, the total asset turnover still reflects the company's ability to efficiently use its total asset base to generate sales.

In summary, Fortive Corp's long-term activity ratios suggest that the company is effectively leveraging its fixed assets to generate revenue, while also efficiently utilizing its total assets to drive sales growth. Investors and stakeholders can view these ratios positively as they indicate operational efficiency and effective asset utilization by the company.