Illinois Tool Works Inc (ITW)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	5.53	4.65	5.07	6.27	7.11
Receivables turnover	5.06	4.96	5.02	4.93	5.64
Payables turnover	16.26	16.08	14.69	13.97	17.53
Working capital turnover	10.13	8.69	4.90	3.14	3.39

The activity ratios of Illinois Tool Works, Inc. indicate the efficiency of the company in managing its assets and liabilities over the past five years.

1. Inventory turnover:
Illinois Tool Works has shown fluctuations in its inventory turnover ratio over the years, ranging from 4.59 to 7.03. The increasing trend in inventory turnover from 2020 to 2021 followed by a decrease in 2022 and 2023 may indicate changes in sales patterns, inventory management practices, or market demand.

2. Receivables turnover:
The receivables turnover ratio has remained relatively stable, ranging from 4.80 to 5.40. This indicates that Illinois Tool Works has been efficient in collecting its accounts receivable within a consistent time frame over the years.

3. Payables turnover:
The payables turnover ratio has shown an increasing trend, with values ranging from 13.81 to 17.35. Illinois Tool Works has been extending its payables at a faster rate compared to its purchases, which may indicate better negotiation terms with suppliers or efficient cash management.

4. Working capital turnover:
The working capital turnover ratio has shown significant fluctuations over the years, ranging from 3.20 to 10.32. A higher working capital turnover reflects the company's ability to generate sales using its working capital effectively.

Overall, Illinois Tool Works has shown varying levels of efficiency in managing its inventory, receivables, payables, and working capital over the years, indicating a need for continuous monitoring and adjustment in its operations to maintain optimal efficiency and performance.

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	65.97	78.51	71.96	58.17	51.34
Days of sales outstanding (DSO)	days	72.13	73.61	72.77	74.00	64.68
Number of days of payables	days	22.45	22.70	24.85	26.13	20.82

The Days of Inventory on Hand (DOH) for Illinois Tool Works, Inc. have shown some volatility over the past five years, ranging from a low of 51.89 days in 2019 to a high of 79.51 days in 2022. The downward trend from 2022 to 2023 (66.88 days) indicates an improvement in efficiency in managing inventory levels.

In terms of Days of Sales Outstanding (DSO), the company has maintained relatively consistent levels over the last five years, with a slight increase from 67.55 days in 2019 to 73.67 days in 2023. This suggests that Illinois Tool Works may be taking longer to collect its accounts receivable.

The Number of Days of Payables has also been relatively stable, fluctuating between 21.04 days in 2019 and 26.43 days in 2020. The decrease to 22.76 days in 2023 indicates that the company is taking slightly longer to pay its suppliers.

Overall, the activity ratios suggest that Illinois Tool Works has made improvements in managing its inventory levels. However, there may be a need to focus on reducing the days of sales outstanding to improve cash flow management and working capital efficiency.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	8.00	8.51	7.87	6.96	8.03
Total asset turnover	1.02	1.02	0.89	0.79	0.92

Illinois Tool Works, 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 experienced fluctuations over the past five years, ranging from 7.08 to 8.62. This ratio indicates that for every dollar invested in fixed assets, Illinois Tool Works generated between $7.08 and $8.62 in sales. The declining trend in fixed asset turnover from 2019 to 2020 followed by an increase in recent years may indicate improvements in the company's fixed asset utilization efficiency.

Moreover, the total asset turnover ratio has also shown variability, ranging from 0.81 to 1.04. This ratio signifies how effectively Illinois Tool Works is using all its assets to generate revenue. The upward trend in total asset turnover from 2019 to 2023 indicates that the company has been more efficient in generating sales relative to its total asset base.

Overall, the increasing trend in total asset turnover and the relatively stable fixed asset turnover suggest that Illinois Tool Works has been effectively managing its assets to generate sales, especially in recent years. The company's ability to generate higher sales relative to both fixed and total assets over time reflects improved operational efficiency and productivity.