L3Harris Technologies Inc (LHX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 12.51 | 12.62 | 17.02 | 18.17 | 12.97 |
| Receivables turnover | 2.40 | 2.83 | 2.98 | 13.33 | 14.51 |
| Payables turnover | 8.74 | 8.38 | 9.46 | 12.57 | 8.89 |
| Working capital turnover | 370.12 | 17.15 | 9.83 | 7.38 | 21.39 |
Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales and cash flow. Let's analyze the activity ratios of L3Harris Technologies Inc:
1. Inventory Turnover:
- The inventory turnover ratio measures how quickly inventory is sold. L3Harris has maintained a relatively stable inventory turnover ratio over the years, ranging from 12.51 to 18.17. This indicates that the company efficiently manages its inventory levels and sells products at a consistent pace.
2. Receivables Turnover:
- The receivables turnover ratio reflects how quickly a company collects its accounts receivable. L3Harris' receivables turnover has shown a decreasing trend from 2019 to 2023, dropping from 14.51 to 2.40. This could suggest changes in the company's credit policies or the efficiency of its collection process.
3. Payables Turnover:
- The payables turnover ratio measures how effectively a company pays its suppliers. L3Harris has shown a consistent payables turnover ratio over the years, ranging from 8.38 to 12.57. A higher payables turnover ratio indicates that the company is efficiently managing its accounts payable.
4. Working Capital Turnover:
- The working capital turnover ratio reflects how effectively the company utilizes its working capital to generate sales. L3Harris' working capital turnover has shown significant fluctuations, with a notable increase to 370.12 in 2023. This surge could indicate a more efficient utilization of working capital to drive sales growth.
In conclusion, L3Harris Technologies Inc demonstrates efficient management of inventory and payables, while there may be opportunities to improve collections on accounts receivable. The notable increase in the working capital turnover ratio in 2023 indicates a potentially more effective use of working capital to generate revenue.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 29.18 | 28.91 | 21.45 | 20.09 | 28.15 |
| Days of sales outstanding (DSO) | days | 152.35 | 128.80 | 122.59 | 27.39 | 25.15 |
| Number of days of payables | days | 41.75 | 43.56 | 38.60 | 29.03 | 41.05 |
L3Harris Technologies Inc's activity ratios provide insights into the efficiency of the company's operations and management of its working capital.
1. Days of Inventory on Hand (DOH):
- The DOH has been relatively stable over the years, hovering around 20-30 days, except for a significant increase in 2021. This indicates that the company has been able to manage its inventory efficiently, with lower values suggesting quicker turnover of inventory. The increase in 2021 may be a reflection of changes in the company's production or sales strategy.
2. Days of Sales Outstanding (DSO):
- The DSO has shown a consistent upward trend over the years, indicating that the company is taking longer to collect its outstanding receivables. The sharp spike in 2023 may be a cause for concern, as it suggests a higher risk of bad debt or liquidity issues. The company may need to review its credit policies or collection procedures to improve this ratio.
3. Number of Days of Payables:
- The number of days of payables has also been increasing gradually, indicating that the company is taking longer to pay its suppliers. This can sometimes be a strategic move to optimize cash flow, but it may also indicate strained relationships with suppliers if the payment terms are stretching too far. The increase in 2023 suggests a further delay in payables, which may impact relationships with suppliers in the long run.
Overall, L3Harris Technologies Inc needs to focus on improving its collections process to reduce DSO and maintain a healthy balance between inventory management and payables to ensure efficient working capital management and sustainable operations.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 7.14 | 8.61 | 9.13 | 8.52 | 7.42 |
| Total asset turnover | 0.45 | 0.50 | 0.51 | 0.48 | 0.66 |
Long-term activity ratios provide insights into the efficiency of a company's utilization of its assets to generate sales.
The Fixed Asset Turnover ratio of L3Harris Technologies Inc has shown a declining trend from 2019 to 2023, with values of 7.14 in 2023, 8.61 in 2022, 9.13 in 2021, 8.52 in 2020, and 7.42 in 2019. This indicates that the company is generating $7.14 of sales for every $1 invested in fixed assets in 2023, down from $9.13 in 2021. The decreasing trend suggests that there may be inefficiencies in the utilization of fixed assets or a decrease in sales relative to the investment in fixed assets.
In contrast, the Total Asset Turnover ratio of L3Harris Technologies Inc has also experienced fluctuations over the same period, but with an overall decreasing trend. The values were 0.45 in 2023, 0.50 in 2022, 0.51 in 2021, 0.48 in 2020, and 0.66 in 2019. This ratio reveals that the company generated $0.45 of sales for every $1 of total assets in 2023, compared to $0.66 in 2019. The decline in total asset turnover suggests that the company may be struggling to efficiently use its total assets to generate sales.
Overall, the decline in both the Fixed Asset Turnover and Total Asset Turnover ratios of L3Harris Technologies Inc over the years could indicate a need for the company to reassess its asset utilization strategies to improve efficiency and profitability.