McCormick & Company Incorporated (MKC)
Activity ratios
Short-term
Turnover ratios
| Feb 29, 2024 | Nov 30, 2023 | Aug 31, 2023 | May 31, 2023 | Feb 28, 2023 | Nov 30, 2022 | Aug 31, 2022 | May 31, 2022 | Feb 28, 2022 | Nov 30, 2021 | Aug 31, 2021 | May 31, 2021 | Feb 28, 2021 | Nov 30, 2020 | Aug 31, 2020 | May 31, 2020 | Feb 29, 2020 | Nov 30, 2019 | Aug 31, 2019 | May 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Inventory turnover | 3.68 | 3.69 | 3.41 | 3.25 | 3.06 | 3.04 | 2.92 | 2.94 | 3.12 | 3.23 | 3.07 | 3.12 | 3.23 | 3.20 | 3.46 | 3.86 | 3.81 | 4.00 | 3.79 | 3.94 |
| Receivables turnover | 11.81 | 11.34 | 10.58 | 11.69 | 11.20 | 11.07 | 11.29 | 12.86 | 12.31 | 11.50 | 11.36 | 12.04 | 11.38 | 10.60 | 11.13 | 10.98 | 13.00 | 10.63 | 10.78 | 12.40 |
| Payables turnover | 3.67 | 3.72 | 3.80 | 3.77 | 3.66 | 3.48 | 3.53 | 3.51 | 3.62 | 3.59 | 3.61 | 3.44 | 3.58 | 3.20 | 3.61 | 3.74 | 4.03 | 3.78 | 4.10 | 4.55 |
| Working capital turnover | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 162.49 | — | — | — | — |
The activity ratios of McCormick & Company Incorporated over the past few periods indicate the following trends:
1. Inventory Turnover:
- McCormick's inventory turnover has been relatively stable, ranging between 2.92 and 3.86.
- The company is efficiently managing its inventory, with the turnover showing a consistent level of sales relative to the value of inventory on hand.
2. Receivables Turnover:
- Receivables turnover has fluctuated between 10.58 and 13.00, suggesting variations in the efficiency of collecting receivables over time.
- The company's ability to convert receivables into cash has shown some volatility but generally remains at a moderate to high level.
3. Payables Turnover:
- Payables turnover has ranged from 3.20 to 4.55, indicating some variability in the rate at which McCormick pays its suppliers.
- The company has been able to manage its payables effectively, with turnover figures demonstrating a moderate level of payment efficiency.
4. Working Capital Turnover:
- Data for working capital turnover is missing for most periods, except for a significant figure of 162.49 in May 2020.
- This high value in May 2020 may suggest a period of efficient utilization of working capital to generate sales, but without more recent data, it is challenging to draw meaningful conclusions.
In summary, McCormick & Company's activity ratios reflect stable inventory management, varying efficiency in collecting receivables, fluctuating payment practices, and a notable period of efficient working capital utilization in May 2020. These trends provide insights into the company's operational performance and financial management practices.
Average number of days
| Feb 29, 2024 | Nov 30, 2023 | Aug 31, 2023 | May 31, 2023 | Feb 28, 2023 | Nov 30, 2022 | Aug 31, 2022 | May 31, 2022 | Feb 28, 2022 | Nov 30, 2021 | Aug 31, 2021 | May 31, 2021 | Feb 28, 2021 | Nov 30, 2020 | Aug 31, 2020 | May 31, 2020 | Feb 29, 2020 | Nov 30, 2019 | Aug 31, 2019 | May 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 99.10 | 98.85 | 107.02 | 112.34 | 119.22 | 120.00 | 124.88 | 124.15 | 117.01 | 112.87 | 118.84 | 116.92 | 113.14 | 114.18 | 105.53 | 94.59 | 95.92 | 91.33 | 96.29 | 92.65 |
| Days of sales outstanding (DSO) | days | 30.92 | 32.19 | 34.51 | 31.21 | 32.60 | 32.97 | 32.34 | 28.39 | 29.66 | 31.75 | 32.13 | 30.31 | 32.07 | 34.44 | 32.78 | 33.24 | 28.08 | 34.33 | 33.87 | 29.44 |
| Number of days of payables | days | 99.42 | 98.21 | 96.06 | 96.83 | 99.69 | 104.86 | 103.51 | 104.01 | 100.87 | 101.60 | 101.12 | 105.99 | 101.97 | 114.15 | 101.13 | 97.54 | 90.62 | 96.54 | 89.04 | 80.18 |
The activity ratios for McCormick & Company Incorporated provide insights into the efficiency of the company's operations.
1. Days of Inventory on Hand (DOH): This ratio measures how many days, on average, the company holds inventory before selling it. A decrease in DOH indicates faster inventory turnover, which is generally favorable. Over the period analyzed, the DOH has fluctuated, with a peak of 124.88 days in August 2022 and a low of 91.33 days in May 2020. The company should aim to manage its inventory levels efficiently to optimize working capital.
2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for the company to collect payment after making a sale. A lower DSO signifies faster collection of receivables, which is preferable. The DSO ranged from 28.39 days in May 2022 to 34.44 days in August 2020. McCormick should continue to monitor and improve its credit and collection processes to reduce DSO.
3. Number of Days of Payables: This ratio indicates the average number of days it takes for the company to pay its suppliers. A longer period suggests favorable payment terms for the company. The number of days of payables varied, with a low of 80.18 days in May 2019 and a high of 114.15 days in February 2021. McCormick should strike a balance between maximizing payment terms while maintaining good relationships with suppliers.
Overall, McCormick & Company should focus on optimizing its inventory management, improving receivables collection, and managing payables effectively to enhance operational efficiency and liquidity. Tracking these activity ratios over time can help the company identify trends and areas for improvement in its working capital management.
Long-term
| Feb 29, 2024 | Nov 30, 2023 | Aug 31, 2023 | May 31, 2023 | Feb 28, 2023 | Nov 30, 2022 | Aug 31, 2022 | May 31, 2022 | Feb 28, 2022 | Nov 30, 2021 | Aug 31, 2021 | May 31, 2021 | Feb 28, 2021 | Nov 30, 2020 | Aug 31, 2020 | May 31, 2020 | Feb 29, 2020 | Nov 30, 2019 | Aug 31, 2019 | May 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fixed asset turnover | 4.95 | 5.03 | 5.14 | 5.21 | 5.22 | 5.30 | 5.61 | 5.58 | 5.60 | 5.54 | 5.52 | 5.42 | 5.48 | 5.45 | 5.75 | 5.85 | 5.69 | 5.61 | 5.86 | 5.80 |
| Total asset turnover | 0.52 | 0.52 | 0.51 | 0.50 | 0.48 | 0.48 | 0.49 | 0.49 | 0.49 | 0.49 | 0.48 | 0.47 | 0.46 | 0.46 | 0.51 | 0.51 | 0.51 | 0.52 | 0.51 | 0.52 |
The fixed asset turnover ratio for McCormick & Company Incorporated has shown a relatively stable trend over the past several periods, with values ranging from 4.95 to 5.86. This suggests that the company efficiently utilizes its fixed assets to generate sales revenue. The consistency in this ratio indicates a good level of operational efficiency in managing and utilizing its fixed assets.
On the other hand, the total asset turnover ratio has also been relatively stable, fluctuating between 0.46 and 0.52. This ratio indicates the company's ability to generate sales in relation to its total assets. A total asset turnover ratio of less than 1 indicates that McCormick & Company is generating less revenue than the value of its total assets. However, the stability of this ratio over time suggests a consistent performance in utilizing its total assets to generate sales.
In conclusion, the fixed asset turnover and total asset turnover ratios of McCormick & Company Incorporated highlight the company's efficient use of assets to drive revenue generation, indicating a good level of operational performance and asset utilization efficiency over the analyzed periods.