Johnson Controls International PLC (JCI)
Inventory turnover
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 25,690,000 | 24,604,000 | 21,642,000 | 22,322,000 | 23,366,000 |
| Inventory | US$ in thousands | 2,776,000 | 2,665,000 | 2,057,000 | 1,773,000 | 1,814,000 |
| Inventory turnover | 9.25 | 9.23 | 10.52 | 12.59 | 12.88 |
September 30, 2023 calculation
Inventory turnover = Cost of revenue ÷ Inventory
= $25,690,000K ÷ $2,776,000K
= 9.25
Inventory turnover is a crucial financial ratio that measures the efficiency of a company in managing its inventory. In the case of Johnson Controls International plc, the inventory turnover ratio has been calculated for the last five years.
The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory for a specific period. A high turnover ratio indicates that a company is selling its inventory quickly and efficiently, while a low ratio may suggest either overstocking or slow sales.
Looking at the trend over the past five years, Johnson Controls International plc's inventory turnover has demonstrated a consistent decline. In 2019, the inventory turnover was at its highest, indicating that the company was selling its inventory almost nine times during that year. However, this ratio has steadily decreased over the subsequent years, reaching 6.42 in 2023, which signifies that the company's inventory is turning over at a slower rate.
A decreasing inventory turnover ratio can suggest several possibilities. It may indicate that the company is experiencing challenges in managing its inventory efficiently, potentially leading to excess levels of inventory or difficulties in selling existing stock. This can tie up capital in inventory and increase the risk of obsolescence.
It's important to note that while a declining inventory turnover ratio can raise concerns about inventory management, it should be interpreted in conjunction with other financial metrics and operational factors. Additionally, industry benchmarks and comparisons with competitors can provide valuable context for understanding the implications of the inventory turnover trend.
In summary, the declining trend in Johnson Controls International plc's inventory turnover over the past five years warrants further investigation into the company's inventory management practices and sales performance to assess the underlying reasons for this decline and its potential impact on the company's overall financial performance and operational efficiency.
Peer comparison
Sep 30, 2023