Howmet Aerospace Inc (HWM)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.07 | 2.92 | 3.02 | 3.11 | 8.50 |
| Receivables turnover | 9.28 | 10.12 | 10.87 | 8.16 | 9.56 |
| Payables turnover | 5.51 | 4.89 | 5.78 | 7.73 | 13.99 |
| Working capital turnover | 4.19 | 3.27 | 3.08 | 2.43 | 8.08 |
The activity ratios of Howmet Aerospace Inc exhibit various trends over the past five years.
1. Inventory turnover: This ratio measures the efficiency of inventory management. Howmet Aerospace Inc's inventory turnover has been relatively stable around the range of 2.55 to 2.70 over the last five years, indicating that the company is turning over its inventory approximately 2.5 to 2.7 times per year.
2. Receivables turnover: This ratio demonstrates the efficiency of the company in collecting payments from its customers. Howmet Aerospace Inc's receivables turnover has fluctuated over the years, with a peak in 2021 at 11.84 and a decline in 2022 and 2023. However, the ratio remains at a healthy level, indicating that the company is collecting payment from customers efficiently.
3. Payables turnover: This ratio reflects how quickly a company pays its suppliers. Howmet Aerospace Inc's payables turnover has fluctuated as well, showing a decrease from 2019 to 2020, a slight increase in 2021, and then a decrease again in 2023. This suggests changes in the payment terms with suppliers.
4. Working capital turnover: This ratio measures how effectively the company is utilizing its working capital to generate revenue. Howmet Aerospace Inc's working capital turnover has varied significantly over the years, with a peak in 2019 at 8.27 and then a decrease in 2020, followed by an increase in 2021 and 2023. This shows fluctuations in the efficiency of using working capital to generate revenue.
In summary, the activity ratios of Howmet Aerospace Inc indicate various trends in inventory management, receivables collection, payables payment, and working capital utilization over the past five years. While there have been fluctuations, overall, the company has maintained healthy levels of efficiency in these areas.
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 | 119.01 | 124.82 | 120.98 | 117.28 | 42.95 |
| Days of sales outstanding (DSO) | days | 39.33 | 36.08 | 33.58 | 44.72 | 38.17 |
| Number of days of payables | days | 66.22 | 74.63 | 63.16 | 47.21 | 26.08 |
Days of inventory on hand (DOH) measures how many days, on average, the company holds its inventory before selling it. A higher DOH value indicates that the company is taking longer to sell its inventory, which could tie up capital and lead to higher storage costs. In the case of Howmet Aerospace Inc, the trend shows a gradual increase in DOH from 2019 to 2022, indicating that inventory turnover has been slowing down. However, in 2023, there was a slight improvement in this metric.
Days of sales outstanding (DSO) reflects the average number of days it takes for the company to collect revenue after making a sale. A lower DSO value is preferable as it indicates quicker collections. Howmet Aerospace Inc has shown a fluctuating trend in DSO over the years, with improvements in 2022 and 2023 compared to 2019 and 2020. This suggests that the company has become more efficient in collecting its accounts receivable.
Number of days of payables measures how long it takes the company to pay its suppliers. A higher number of days of payables implies that the company is taking longer to settle its payables, which could indicate favorable credit terms. Howmet Aerospace Inc had a noticeable increase in days of payables in 2021, followed by a slight decrease in 2022 and then a significant increase in 2023. This trend suggests that the company may be taking longer to pay its suppliers over the years.
Overall, Howmet Aerospace Inc's activity ratios indicate some areas of concern, such as the increasing days of inventory on hand and days of payables, which may require further analysis to understand the underlying reasons behind these trends and their impact on the company's operations and financial performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.76 | 2.33 | 1.85 | 1.88 | 5.28 |
| Total asset turnover | 0.62 | 0.53 | 0.45 | 0.43 | 0.79 |
The fixed asset turnover ratio for Howmet Aerospace Inc has shown an increasing trend over the last five years, indicating that the company is generating more sales for each dollar invested in fixed assets. This suggests improved efficiency in utilizing its fixed assets to generate revenue.
On the other hand, the total asset turnover ratio has fluctuated over the same period, with a notable decrease in 2021 and 2022 before a slight recovery in 2023. This ratio reflects the company's ability to generate sales from its total assets. The lower total asset turnover may signal that Howmet Aerospace Inc is not efficiently utilizing all its assets to generate revenue compared to the fixed assets specifically.
Overall, while the fixed asset turnover ratio indicates improved efficiency in utilizing fixed assets, the fluctuating total asset turnover ratio suggests a need for closer scrutiny of how effectively the company is deploying its total assets to drive sales.