Lockheed Martin Corporation (LMT)
Payables turnover
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 59,092,000 | 57,697,000 | 57,983,000 | 56,744,000 | 51,445,000 |
| Payables | US$ in thousands | 2,312,000 | 2,117,000 | 780,000 | 880,000 | 1,281,000 |
| Payables turnover | 25.56 | 27.25 | 74.34 | 64.48 | 40.16 |
December 31, 2023 calculation
Payables turnover = Cost of revenue ÷ Payables
= $59,092,000K ÷ $2,312,000K
= 25.56
The payables turnover ratio measures how effectively a company manages its accounts payable. It is calculated by dividing the total purchases made during a period by the average accounts payable for the same period. A higher payables turnover ratio typically indicates that a company is paying its suppliers more frequently and efficiently.
In the case of Lockheed Martin Corp., the payables turnover ratio has fluctuated over the past five years. In 2023, the payables turnover ratio was 25.52 times, suggesting a decrease in the efficiency of paying suppliers compared to the previous year. In 2022, the ratio was 27.21 times, also showing a decrease from the exceptionally high ratio of 74.29 times in 2021. This dramatic decrease in 2022 and 2023 may indicate a change in the company's payment practices or the timing of its purchases.
It is important to note that a very high or very low payables turnover ratio should be interpreted in the context of the company's industry and business model. A high ratio may indicate a very efficient management of payables, but it could also signal potential issues with the company's relationships with suppliers. A low ratio, conversely, may suggest that the company is not efficiently managing its payables, which could impact cash flow and working capital.
In conclusion, while the payables turnover ratio for Lockheed Martin Corp. has fluctuated over the past five years, further analysis of the company's financial and operational activities would be necessary to provide a comprehensive assessment of its payables management.