McKesson Corporation (MCK)
Activity ratios
Short-term
Turnover ratios
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | |
|---|---|---|---|---|---|
| Inventory turnover | 15.03 | 14.02 | 13.43 | 13.41 | 11.75 |
| Receivables turnover | 14.00 | 14.29 | 14.26 | 14.20 | 12.42 |
| Payables turnover | 6.25 | 6.29 | 6.22 | 6.59 | 5.80 |
| Working capital turnover | — | — | — | — | 186.26 |
McKesson Corporation's activity ratios exhibit a positive trend over the past five years, reflecting efficient management of its operating assets and liabilities.
1. Inventory Turnover:
The inventory turnover ratio has shown consistent improvement from 11.75 in 2021 to 15.03 in 2025, indicating that McKesson is selling its inventory at a faster rate. This signifies effective inventory management and potentially lower carrying costs.
2. Receivables Turnover:
Similarly, the receivables turnover ratio has steadily increased from 12.42 in 2021 to 14.00 in 2025, suggesting that the company is collecting its receivables more quickly. A higher turnover ratio implies a shorter time between credit sales and cash collection, improving cash flow and reducing the risk of bad debts.
3. Payables Turnover:
The payables turnover ratio has also risen from 5.80 in 2021 to 6.25 in 2025, indicating that McKesson is taking longer to pay its suppliers. This may imply improved bargaining power or better credit terms with suppliers, leading to potential cost savings and enhanced liquidity.
4. Working Capital Turnover:
While data for 2022-2025 is unavailable, the working capital turnover ratio was high at 186.26 in 2021. This suggests that McKesson efficiently utilized its working capital to generate revenue. A high working capital turnover ratio indicates effective management of current assets and liabilities to support operations and growth.
Overall, the increasing trend in activity ratios reflects McKesson Corporation's strong operational efficiency and effective working capital management over the years. These ratios indicate the company's ability to optimize its resources and enhance its financial performance in the healthcare distribution industry.
Average number of days
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 24.28 | 26.03 | 27.19 | 27.21 | 31.07 |
| Days of sales outstanding (DSO) | days | 26.07 | 25.54 | 25.60 | 25.70 | 29.39 |
| Number of days of payables | days | 58.41 | 58.00 | 58.67 | 55.42 | 62.92 |
Based on the provided data for McKesson Corporation's activity ratios, we can analyze the following:
1. Days of Inventory on Hand (DOH)
- McKesson's DOH decreased from 31.07 days as of March 31, 2021, to 24.28 days as of March 31, 2025.
- A decreasing trend in DOH indicates that McKesson has been managing its inventory efficiently, possibly by optimizing inventory levels or improving inventory turnover.
2. Days of Sales Outstanding (DSO)
- McKesson's DSO decreased from 29.39 days as of March 31, 2021, to 26.07 days as of March 31, 2025.
- A decreasing DSO implies that McKesson has been collecting its accounts receivable faster over the years, which may indicate effective credit management practices or a stable customer base.
3. Number of Days of Payables
- McKesson's number of days of payables remained relatively stable, ranging from 55.42 days as of March 31, 2022, to 58.67 days as of March 31, 2023.
- This stable trend suggests that McKesson has been maintaining a consistent payment cycle with its suppliers, potentially benefiting from favorable payment terms or efficient cash flow management.
Overall, the decreasing trends in DOH and DSO reflect improved efficiency in managing inventory and accounts receivable, while the stable payables period indicates a balanced approach to managing relationships with suppliers. These activity ratios collectively suggest that McKesson has been effectively managing its working capital and operational processes to support its financial performance and liquidity position.
See also:
Long-term
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | |
|---|---|---|---|---|---|
| Fixed asset turnover | — | — | 127.11 | 126.18 | 92.30 |
| Total asset turnover | 4.78 | 4.58 | 4.44 | 4.17 | 3.66 |
McKesson Corporation's long-term activity ratios, specifically the fixed asset turnover and total asset turnover, have shown an upward trend over the five-year period from March 31, 2021, to March 31, 2025.
The fixed asset turnover ratio has increased steadily from 92.30 in 2021 to 127.11 in 2023. However, data for 2024 and 2025 are unavailable. This trend indicates that McKesson is generating more revenue relative to its investment in fixed assets, which is a positive sign of operational efficiency.
Similarly, the total asset turnover ratio has improved from 3.66 in 2021 to 4.78 in 2025. This indicates that McKesson is utilizing its total assets more effectively to generate sales revenue. A higher total asset turnover ratio signifies that the company is efficiently managing its assets to generate revenue, which is a key indicator of operational efficiency and effective asset utilization.
Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios suggests that McKesson Corporation has been improving its operational efficiency and asset utilization over the years. This positive trend is indicative of the company's ability to generate more revenue for each dollar invested in fixed and total assets, respectively.