McCormick & Company Incorporated (MKC)
Fixed asset turnover
| Nov 30, 2024 | Nov 30, 2023 | Nov 30, 2022 | Nov 30, 2021 | Nov 30, 2020 | ||
|---|---|---|---|---|---|---|
| Revenue | US$ in thousands | 6,723,700 | 6,662,200 | 6,350,500 | 6,317,900 | 5,601,300 |
| Property, plant and equipment | US$ in thousands | 1,413,000 | 1,324,700 | 1,198,000 | 1,140,300 | 1,028,400 |
| Fixed asset turnover | 4.76 | 5.03 | 5.30 | 5.54 | 5.45 |
November 30, 2024 calculation
Fixed asset turnover = Revenue ÷ Property, plant and equipment
= $6,723,700K ÷ $1,413,000K
= 4.76
The fixed asset turnover ratio measures how efficiently a company is utilizing its fixed assets to generate revenue. In the case of McCormick & Company Incorporated, there has been a gradual decline in the fixed asset turnover ratio over the past five years.
In November 2020, the fixed asset turnover ratio stood at 5.45, indicating that for every dollar of fixed assets, McCormick generated $5.45 in revenue. The ratio improved slightly to 5.54 in November 2021, suggesting a slightly more efficient use of fixed assets to generate revenue.
However, from November 2021 to November 2024, the fixed asset turnover ratio experienced a steady decrease from 5.54 to 4.76. This downward trend may indicate that McCormick is not effectively utilizing its fixed assets to generate revenue, potentially resulting in lower sales relative to its fixed asset base.
A declining fixed asset turnover ratio could signal inefficiencies in production processes, underutilization of fixed assets, or decreasing demand for the company's products. Management should investigate the underlying reasons for this trend and take appropriate measures to improve the utilization of fixed assets to enhance overall operational efficiency and profitability.