MillerKnoll Inc (MLKN)

Short-term

Turnover ratios

The activity ratios provide insights into how efficiently MillerKnoll Inc is managing its assets and liabilities to generate sales and cash flows. Let's analyze each ratio in detail:

1. Inventory Turnover:
The inventory turnover ratio indicates how effectively the company is managing its inventory. It measures the number of times the inventory is sold and replaced over a period. The increasing trend in inventory turnover from 2019 to 2021 is a positive sign, indicating that MillerKnoll is managing its inventory levels more efficiently. However, there was a slight decrease in inventory turnover in 2022, and then a significant increase in 2023. This could be due to various factors such as changes in the sales mix, production delays, or inventory management strategies.

2. Receivables Turnover:
The receivables turnover ratio reflects how quickly the company is collecting its receivables. A higher ratio suggests more efficient credit policies and better management of accounts receivable. The consistently high and increasing receivables turnover ratios indicate that MillerKnoll is effectively collecting its receivables, which is a positive sign of strong liquidity and efficient credit management.

3. Payables Turnover:
The payables turnover ratio shows how quickly the company pays its suppliers. A higher ratio indicates that the company is effectively managing its trade payables. The significant increase in payables turnover in 2020 followed by a decrease in 2021 and a subsequent increase in 2023 might suggest changes in the company's payment terms, supplier relationships, or cash flow management.

4. Working Capital Turnover:
The working capital turnover measures how effectively the company utilizes its working capital to generate sales. A higher ratio indicates efficient utilization of working capital. The decreasing trend in working capital turnover from 2019 to 2021 followed by an increase in 2023 may indicate changes in the company's operating cycle, investment in working capital, or sales levels.

Overall, the analysis of MillerKnoll Inc's activity ratios suggests that the company has been managing its assets, receivables, and payables efficiently, leading to improved turnover ratios in some areas. However, the fluctuating trends in certain ratios require further investigation to understand the underlying factors impacting the company's operational efficiency.

---

Average number of days

To analyze MillerKnoll Inc's activity ratios, we will focus on the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables. These ratios provide insights into the management of inventory, accounts receivable, and accounts payable, helping to assess the efficiency of the company's operating cycle and working capital management.

1. Days of Inventory on Hand (DOH):
- In 2023, the DOH decreased to 66.95 days from 82.66 days in 2022, indicating a more efficient management of inventory. However, compared to 2019 and 2020, the current DOH is higher, signaling a possible increase in inventory holding costs.
- The increase in DOH from 2020 to 2022 and the subsequent decrease in 2023 might indicate fluctuations in inventory management efficiency. It would be important to investigate the reasons behind these fluctuations.

2. Days of Sales Outstanding (DSO):
- The DSO for 2023 decreased to 32.46 days from 35.23 days in 2022, indicating a slightly improved collection of accounts receivable.
- Comparing 2023 to 2020, there is an increase in DSO, suggesting a lengthening of the company's collection period. This could impact cash flow and liquidity.

3. Number of Days of Payables:
- The number of days of payables decreased to 37.02 days in 2023 from 49.98 days in 2022, indicating a more efficient management of accounts payable.
- The decrease in payables days from 2022 is a positive indicator, suggesting that the company is managing its payables more effectively.

Overall, the analysis of MillerKnoll Inc's activity ratios reveals some fluctuations in the management of inventory, accounts receivable, and accounts payable. While the company has improved its management of inventory and payables in 2023, there has been a slight increase in the collection period for accounts receivable. Further investigation into the reasons behind these fluctuations and their impact on working capital and cash flow would provide additional insights into the company's operational efficiency.

---

Long-term

The long-term activity ratios of MillerKnoll Inc can provide valuable insights into the company's efficiency in utilizing its assets to generate sales. Let's analyze the trends and implications of the fixed asset turnover and total asset turnover ratios.

Fixed Asset Turnover:
The fixed asset turnover ratio measures how efficiently a company uses its fixed assets to generate sales. A higher ratio indicates better utilization of fixed assets. MillerKnoll Inc's fixed asset turnover has been consistently high over the past five years, ranging from 6.79 to 7.62. This indicates that the company has been effectively using its long-term assets such as property, plant, and equipment to generate sales. The increasing trend suggests that MillerKnoll Inc has been able to generate more sales from its fixed assets over time, which is a positive sign of efficiency.

Total Asset Turnover:
The total asset turnover ratio measures how efficiently a company utilizes all of its assets to generate sales. A higher ratio indicates better utilization of total assets. MillerKnoll Inc's total asset turnover ratio has shown a declining trend over the past five years, decreasing from 1.64 in 2019 to 0.96 in 2023. This decline suggests that the company may be experiencing challenges in generating sales relative to its total asset base. A lower total asset turnover ratio could indicate issues such as excess idle or unproductive assets, which may be impacting the company's overall efficiency in generating sales.

Overall, while the fixed asset turnover ratio demonstrates that MillerKnoll Inc has been effectively utilizing its long-term assets to generate sales, the declining trend in the total asset turnover ratio raises concerns about the company's overall asset utilization efficiency. Further analysis of the composition and utilization of the company's total assets could provide additional insights into the factors influencing this trend and potential opportunities for improvement in asset efficiency.