3M Company (MMM)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.83 | 3.58 | 3.77 | 3.92 | 4.15 |
| Receivables turnover | 6.88 | 7.55 | 7.59 | 6.84 | 6.71 |
| Payables turnover | 5.69 | 6.04 | 6.28 | 6.48 | 7.69 |
| Working capital turnover | 30.20 | 6.63 | 5.55 | 4.58 | 8.57 |
3M Co.'s inventory turnover ratio has shown a slightly increasing trend over the past five years, indicating that the company is managing its inventory efficiently. The ratio increased from 3.58 in 2019 to 3.83 in 2023.
The receivables turnover ratio has been relatively stable over the same period, with a slight decrease from 7.55 in 2022 to 6.88 in 2023. This suggests that 3M is collecting its receivables at a consistent pace.
The payables turnover ratio has also been relatively stable over the past five years, with a decrease from 7.69 in 2019 to 5.69 in 2023. This indicates that the company is taking longer to pay its suppliers.
The working capital turnover ratio has shown significant fluctuations, with a sharp increase from 8.57 in 2019 to 30.20 in 2023. This ratio indicates how efficiently 3M is using its working capital to generate revenue.
Overall, the activity ratios suggest that 3M Co. is managing its inventory efficiently, collecting receivables at a steady pace, and using its working capital effectively. However, the company may need to monitor its payables turnover ratio to ensure timely payments to suppliers.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 95.26 | 101.95 | 96.81 | 93.18 | 88.05 |
| Days of sales outstanding (DSO) | days | 53.05 | 48.33 | 48.11 | 53.36 | 54.42 |
| Number of days of payables | days | 64.10 | 60.41 | 58.14 | 56.29 | 47.46 |
To analyze 3M Co.'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.
1. Days of Inventory on Hand (DOH):
The trend in DOH indicates how efficiently 3M is managing its inventory. The company's DOH has been increasing over the past five years, from 88.05 days in 2019 to 95.26 days in 2023. This suggests that 3M is taking longer to sell its inventory, which could tie up its working capital and increase holding costs.
2. Days of Sales Outstanding (DSO):
DSO measures how quickly 3M collects its accounts receivable. A lower DSO is generally more favorable, as it indicates faster cash collection. 3M has shown improvements in DSO over the years, decreasing from 54.42 days in 2019 to 53.05 days in 2023. This indicates that 3M has been more effective in collecting payments from customers in a timely manner.
3. Number of Days of Payables:
The number of days of payables reflects how long 3M takes to pay its suppliers. An increasing trend in this ratio may suggest that the company is taking longer to settle its payables. 3M's number of days of payables has been increasing over the years, from 47.46 days in 2019 to 64.10 days in 2023. This could imply that 3M is stretching its payables, possibly to improve its cash flow or working capital position.
In summary, 3M Co. has been facing challenges in managing its inventory efficiently, as reflected in the increasing DOH ratio. However, the company has made improvements in collecting receivables faster, as seen in the decreasing trend of DSO. The increase in the number of days of payables suggests a deliberate strategy to manage cash flow and working capital.
See also:
3M Company Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.57 | 3.73 | 3.75 | 3.42 | 3.44 |
| Total asset turnover | 0.65 | 0.74 | 0.75 | 0.68 | 0.72 |
The fixed asset turnover ratio for 3M Co. has shown a declining trend over the past five years, from 3.44 in 2019 to 3.57 in 2023. This signifies that the company generated $3.57 in sales for every dollar invested in fixed assets in 2023. Although there was a slight decrease in 2023 compared to the previous two years, the ratio remains relatively stable.
On the other hand, the total asset turnover ratio also exhibited a similar pattern, declining from 0.72 in 2019 to 0.65 in 2023. This indicates that the company generated $0.65 in sales for every dollar invested in total assets in 2023. The decreasing trend in total asset turnover suggests that 3M Co. may be experiencing challenges in efficiently utilizing its total assets to generate sales.
Overall, the fixed asset turnover ratio for 3M Co. is consistently higher than the total asset turnover ratio, signaling that the company's fixed assets are being utilized more efficiently compared to its total assets. Continued monitoring of both ratios is essential to assess the company's operational efficiency and asset utilization in the long term.