WW Grainger Inc (GWW)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Inventory turnover | 6.19 | 6.31 | 6.14 | 5.96 | 5.83 | 6.18 | 6.23 | 6.20 | 6.19 | 6.29 | 6.41 | 6.39 | 6.35 | 6.18 | 6.47 | 6.72 | 6.21 | 6.64 | 6.60 | 6.66 |
| Receivables turnover | 7.48 | 6.63 | 6.59 | 6.79 | 7.10 | 6.81 | 6.73 | 6.75 | 7.38 | 7.20 | 7.46 | 7.49 | 7.95 | 7.83 | 7.92 | 7.21 | 8.02 | 7.58 | 7.47 | 7.53 |
| Payables turnover | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Working capital turnover | 4.76 | 4.61 | 4.65 | 4.77 | 5.10 | 5.07 | 5.11 | 5.00 | 5.21 | 5.11 | 4.94 | 4.91 | 4.73 | 4.11 | 3.28 | 3.40 | 6.09 | 6.22 | 5.60 | 5.47 |
W.W. Grainger Inc.'s activity ratios provide insights into how efficiently the company manages its assets and liabilities to generate sales.
1. Inventory turnover: The company's inventory turnover has been relatively stable over the quarters, ranging from 4.16 to 4.48. This ratio indicates that Grainger is able to sell and replace its inventory approximately 4 to 4.5 times per year. A higher turnover is generally preferred as it suggests efficient inventory management.
2. Receivables turnover: Grainger's receivables turnover also shows consistency, fluctuating between 6.62 and 7.52. This ratio reflects how quickly the company collects payments from customers. A higher turnover implies faster collections, which is positive in terms of cash flow and liquidity.
3. Payables turnover: The payables turnover ratio for Grainger ranges from 8.26 to 10.46, indicating that the company is taking approximately 8 to 10 months to pay its suppliers. A higher turnover here suggests that the company is managing its payables effectively, potentially improving relationships with suppliers.
4. Working capital turnover: The working capital turnover ratio varies between 4.63 and 5.14. This ratio measures how efficiently the company utilizes its working capital to generate sales revenue. A higher turnover indicates that Grainger is effectively utilizing its working capital to support its operations and sales growth.
Overall, Grainger's activity ratios suggest that the company is effectively managing its inventory, receivables, payables, and working capital to support its revenue generation. The stability and consistency in these ratios indicate a level of efficiency in the company's operations.
Average number of days
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 59.01 | 57.89 | 59.46 | 61.22 | 62.63 | 59.07 | 58.61 | 58.86 | 59.01 | 57.99 | 56.92 | 57.11 | 57.50 | 59.06 | 56.39 | 54.32 | 58.76 | 55.00 | 55.33 | 54.81 |
| Days of sales outstanding (DSO) | days | 48.82 | 55.09 | 55.43 | 53.74 | 51.43 | 53.60 | 54.23 | 54.11 | 49.49 | 50.71 | 48.95 | 48.72 | 45.89 | 46.60 | 46.09 | 50.65 | 45.54 | 48.13 | 48.89 | 48.45 |
| Number of days of payables | days | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
To analyze W.W. Grainger Inc.'s activity ratios, we will look at three key ratios: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.
1. Days of Inventory on Hand (DOH):
- The trend indicates a slight improvement in managing inventory over the last two quarters of 2023. The DOH decreased from 87.68 days in Q4 2022 to 82.86 days in Q4 2023, which signifies that the company is holding less inventory in relation to its sales. This could be attributed to better inventory management practices or adjustments in the procurement process.
2. Days of Sales Outstanding (DSO):
- The DSO shows fluctuation throughout the quarters in 2023. It decreased from 51.13 days in Q4 2022 to 48.55 days in Q4 2023, indicating that the company is collecting its accounts receivable quicker compared to the previous year. However, there was an increase in DSO from Q3 to Q4 2023, which might suggest a delay in collecting payments from customers during that quarter.
3. Number of Days of Payables:
- The number of days of payables has been inconsistent in 2023, ranging from 34.88 to 43.51 days. The decrease in Q4 2023 compared to Q4 2022 may indicate the company is taking longer to pay its vendors, potentially using supplier credit more effectively during that period.
Overall, the improved inventory management reflected in the decreasing DOH and better receivables collection shown by the decreasing DSO are positive signs for the company's liquidity and operational efficiency. However, the fluctuating payables days suggest potential changes in the company's payment terms or cash flow management practices that could impact its working capital position.
Long-term
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fixed asset turnover | 9.88 | 10.49 | 10.72 | 10.61 | 10.36 | 10.43 | 9.82 | 9.41 | 9.08 | 8.77 | 8.48 | 8.19 | 8.41 | 8.34 | 8.47 | 8.57 | 8.16 | 8.19 | 8.13 | 8.24 |
| Total asset turnover | 2.01 | 1.99 | 1.98 | 1.99 | 1.99 | 2.04 | 2.00 | 1.93 | 1.96 | 1.96 | 1.89 | 1.86 | 1.86 | 1.77 | 1.61 | 1.62 | 1.90 | 1.91 | 1.87 | 1.86 |
W.W. Grainger Inc.'s long-term activity ratios provide insight into how efficiently the company is utilizing its assets to generate sales.
The fixed asset turnover ratio has been relatively stable over the quarters, ranging from 9.47 to 10.79. This ratio indicates that for every dollar invested in fixed assets, W.W. Grainger Inc. is generating between 9.47 and 10.79 dollars in revenue. A higher ratio suggests better utilization of fixed assets to generate sales, indicating efficient asset management over the long term. The consistent high values suggest that the company is effectively generating revenue from its fixed assets.
On the other hand, the total asset turnover ratio has shown slight variations, ranging from 1.94 to 2.05. This ratio reveals how efficiently the company is using all its assets to generate sales. A higher ratio indicates that W.W. Grainger Inc. is generating more revenue per dollar of total assets. The values above 1 indicate that the company is efficient in generating sales relative to its total asset base across the quarters, with a peak in Q3 2022.
Overall, both the fixed asset turnover and total asset turnover ratios suggest that W.W. Grainger Inc. has been effectively utilizing its assets to generate sales, with a consistent and efficient performance, which is a positive indicator of the company's operational efficiency and asset management capabilities.