McKesson Corporation (MCK)

Short-term

Turnover ratios

Inventory turnover for McKesson Corporation has shown a consistent improvement over the past five years, with a current ratio of 14.48 as of March 31, 2024, compared to 13.71 in 2020. This indicates that McKesson is efficient in managing its inventory levels and converting them into sales.

Similarly, the receivables turnover has also been relatively stable, with a slight increase from 11.57 in 2020 to 14.28 in 2024. This suggests that McKesson is effectively collecting revenue from its customers.

The payables turnover ratio has shown fluctuations over the years but has remained relatively consistent, ranging from 6.17 in 2020 to 6.93 in 2022. This indicates that McKesson is managing its payables well and is able to meet its obligations to suppliers in a timely manner.

It is worth noting that the working capital turnover ratio is not provided for the earlier years but was significant in 2021 at 186.12. This suggests that McKesson was able to efficiently utilize its working capital to generate revenue in 2021.

Overall, based on the activity ratios, McKesson Corporation appears to be effectively managing its inventory, receivables, and payables, indicating strong operational efficiency and liquidity management.

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Average number of days

To evaluate the efficiency of McKesson Corporation's inventory management, we can analyze its Days of Inventory on Hand (DOH) ratio. The trend shows a slight improvement from 26.63 days in 2020 to 25.21 days in 2024. This suggests that McKesson has been able to reduce the number of days it holds inventory on average, which may indicate better inventory turnover and management over the years.

Next, looking at the Days of Sales Outstanding (DSO) ratio, we see a consistent performance with a decrease from 31.55 days in 2020 to 25.56 days in 2024. A decreasing DSO indicates that McKesson is collecting its accounts receivable more efficiently, potentially resulting from better credit policies or prompt collection efforts.

Lastly, examining the Number of Days of Payables ratio, we notice a fluctuating trend, with an increase from 59.18 days in 2020 to 56.26 days in 2024. This suggests that McKesson takes longer to pay its suppliers, which may indicate changing relationships with suppliers or negotiation strategies.

Overall, the activity ratios for McKesson Corporation show improvements in managing inventory and accounts receivable efficiently. However, there may be a need to monitor the trend in payment periods to ensure optimal working capital management and relationships with suppliers.

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See also:

McKesson Corporation Short-term (Operating) Activity Ratios

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Long-term

The long-term activity ratios of McKesson Corporation reflect the company's efficiency in utilizing its fixed assets and total assets to generate sales revenue over the past five years.

The fixed asset turnover has shown a gradual increasing trend from 97.60 in 2020 to 133.30 in 2024, indicating that McKesson has been more effective in generating sales from its fixed assets. A higher fixed asset turnover ratio suggests that the company is efficiently using its fixed assets to generate sales, which is a positive indicator of operational performance.

Similarly, the total asset turnover ratio has also increased consistently from 3.77 in 2020 to 4.58 in 2024. This demonstrates that McKesson has improved its overall efficiency in generating sales from its total assets. A higher total asset turnover ratio indicates that the company is utilizing its total assets more efficiently to generate sales revenue.

Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios over the five-year period suggests that McKesson Corporation has been effectively managing its assets to drive sales growth and improve operational performance.

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See also:

McKesson Corporation Long-term (Investment) Activity Ratios