McCormick & Company Incorporated (MKC)

Short-term

Turnover ratios

Inventory Turnover Ratio:

- The inventory turnover ratio decreased from 3.81 on February 29, 2020, to 3.33 on November 30, 2024. This indicates that the company's ability to efficiently manage and sell its inventory declined over this period.

Receivables Turnover Ratio:

- The receivables turnover ratio fluctuated over the years, ranging from 10.98 on May 31, 2020, to 12.86 on May 31, 2022. These variations could suggest changes in the company's credit policies and efficiency in collecting receivables.

Payables Turnover Ratio:

- The payables turnover ratio remained relatively stable, hovering around 3.50 over the years. This signifies that McCormick & Company is maintaining a consistent pace of paying its suppliers.

Working Capital Turnover Ratio:

- The working capital turnover ratio data is unavailable for most of the periods, indicating no clear trend or analysis can be drawn for this metric. It appears that the company may not extensively rely on working capital to support its operations based on the lack of data.

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Average number of days

The activity ratios of McCormick & Company Incorporated indicate how efficiently the company manages its assets and liabilities in terms of inventory turnover, accounts receivable collection, and accounts payable turnover.

1. Days of Inventory on Hand (DOH): This ratio measures how many days it takes for the company to sell its average inventory. The trend shows an increasing number of days from 95.92 days on February 29, 2020, to 109.51 days on November 30, 2024, which means the company is taking longer to turn its inventory into sales. A spike in DOH may indicate overstocking or slowing sales.

2. Days of Sales Outstanding (DSO): DSO represents the average number of days it takes for the company to collect payment after making a sale. The DSO trend is relatively stable, with fluctuations but mostly staying within a reasonable range. Lower DSO values are favorable as they indicate quicker collection of receivables and better cash flow management.

3. Number of Days of Payables: This ratio shows the number of days it takes the company to pay its suppliers. The trend in days of payables has witnessed fluctuations, but overall, it has been relatively stable. Longer payment periods could indicate that the company is conserving cash or taking advantage of payment terms, although excessively long payables may strain supplier relationships.

Overall, while there are some fluctuations in these activity ratios over the periods analyzed, it is essential for McCormick & Company to monitor these metrics closely to ensure efficient management of its working capital and maintain a healthy balance between inventory, receivables, and payables.

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Long-term

The fixed asset turnover ratio measures how efficiently a company is utilizing its fixed assets to generate sales. For McCormick & Company Incorporated, the fixed asset turnover ratio has been relatively stable over the past few years, ranging between 4.76 and 5.85. This indicates that the company has been effectively using its fixed assets to generate sales revenue.

On the other hand, the total asset turnover ratio reflects how efficiently the company is using all its assets (both fixed and current) to generate sales. McCormick's total asset turnover ratio has shown a decreasing trend, declining from 0.51 to 0.51 in February 2020 to 0.47 in May 2021, before gradually increasing to 0.51 in August 2024. This suggests that the company may have faced challenges in effectively utilizing all its assets to generate sales during the observed period.

Overall, while the fixed asset turnover ratio indicates efficient utilization of fixed assets for revenue generation, the decreasing trend in the total asset turnover ratio points towards the need for McCormick & Company Incorporated to focus on enhancing the efficiency of utilizing all its assets to generate sales.