3M Company (MMM)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.91 | 3.80 | 3.58 | 3.77 | 3.92 |
| Receivables turnover | 7.69 | 5.18 | 7.55 | 7.59 | 6.84 |
| Payables turnover | 5.43 | 5.40 | 6.04 | 6.28 | 6.48 |
| Working capital turnover | 5.31 | 22.74 | 6.63 | 5.55 | 4.58 |
Based on the provided data, we can analyze the activity ratios of 3M Company for the years ending on December 31, 2020 to December 31, 2024 as follows:
1. Inventory Turnover: The inventory turnover ratio measures how efficiently a company manages its inventory. 3M's inventory turnover has fluctuated over the years, declining from 3.92 in 2020 to 3.58 in 2022, before slightly rebounding to 3.91 in 2024. This indicates that in recent years, 3M has taken longer to sell its inventory, which may imply excess inventory or slower sales turnover.
2. Receivables Turnover: The receivables turnover ratio assesses how effectively a company collects its outstanding receivables. 3M's receivables turnover improved from 6.84 in 2020 to 7.69 in 2024, with a slight dip in 2023. This trend indicates that 3M has been able to collect its receivables more efficiently, demonstrating strong credit control and effective collection procedures.
3. Payables Turnover: The payables turnover ratio evaluates how efficiently a company pays its suppliers. 3M's payables turnover decreased from 6.48 in 2020 to 5.43 in 2024, with a consistent decline over the years. This suggests that 3M is taking longer to pay its suppliers, which could indicate cash flow constraints or changes in payment terms.
4. Working Capital Turnover: The working capital turnover ratio gauges how effectively a company utilizes its working capital to generate sales. 3M's working capital turnover improved significantly from 4.58 in 2020 to 22.74 in 2023, before declining to 5.31 in 2024. This dramatic increase in 2023 suggests that 3M efficiently used its working capital to generate sales, although the subsequent decrease in 2024 warrants further investigation into the company's capital management strategies.
In summary, while 3M has shown improvements in receivables turnover and working capital turnover, the decline in inventory turnover and payables turnover raises concerns about inventory management and payment efficiency. It is essential for 3M to closely monitor these activity ratios to ensure optimal utilization of resources and maintain healthy financial performance.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 93.43 | 96.08 | 101.95 | 96.81 | 93.18 |
| Days of sales outstanding (DSO) | days | 47.44 | 70.45 | 48.33 | 48.11 | 53.36 |
| Number of days of payables | days | 67.20 | 67.63 | 60.41 | 58.14 | 56.29 |
3M Company's activity ratios reflect its operational efficiency in managing inventory, sales, and payables.
1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates the average number of days it takes for 3M to sell its inventory.
- The DOH has been gradually increasing from 93.18 days in 2020 to 96.08 days in 2023 before slightly decreasing to 93.43 days in 2024.
- A higher DOH suggests that 3M may be carrying excess inventory or facing challenges in selling its products efficiently.
2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes for the company to collect payments from its customers.
- The DSO improved significantly from 53.36 days in 2020 to 47.44 days in 2024, with a slight increase observed in 2023.
- A lower DSO indicates that 3M is collecting payments more quickly, which is a positive sign for its cash flow and liquidity.
3. Number of Days of Payables:
- This ratio reflects the average number of days 3M takes to pay its suppliers for goods or services.
- The number of days of payables has been increasing steadily from 56.29 days in 2020 to 67.20 days in 2024.
- A longer payment period may indicate that 3M is utilizing supplier credit effectively, but it could also signify potential liquidity concerns if payables are stretched too far.
Overall, 3M Company's activity ratios demonstrate varying trends in inventory management, accounts receivable collection, and payables turnover, highlighting areas for further analysis and potential operational improvements.
See also:
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.33 | 3.20 | 3.73 | 3.75 | 3.42 |
| Total asset turnover | 0.62 | 0.49 | 0.74 | 0.75 | 0.68 |
The fixed asset turnover ratio for 3M Company has shown a generally positive trend over the five years analyzed, increasing from 3.42 in 2020 to 3.33 in 2024. This indicates that the company is generating more revenue relative to its investment in fixed assets during this period.
In contrast, the total asset turnover ratio has been somewhat more volatile, with a peak of 0.75 in 2021 and a low of 0.49 in 2023. Overall, there seems to be a slight upward trend in total asset turnover from 2020 to 2024, indicating that 3M is becoming more efficient in generating sales from its total assets.
Both ratios suggest that 3M is effectively utilizing its assets to generate revenue, with the fixed asset turnover ratio showing consistent efficiency in generating sales from fixed assets and the total asset turnover ratio indicating an improvement in overall asset utilization over the five-year period.