nVent Electric PLC (NVT)

Short-term

Turnover ratios

nVent Electric plc's activity ratios provide insight into how efficiently the company is managing its resources and generating sales.

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company's inventory is sold and replaced during a period.
- nVent Electric plc's inventory turnover has shown a fluctuating trend over the past five years, with a decrease from 5.47 in 2019 to 4.35 in 2023.
- A lower inventory turnover may indicate excess inventory or potential issues in sales and operations management.

2. Receivables Turnover:
- The receivables turnover ratio reflects the efficiency of the company in collecting its accounts receivable.
- nVent Electric plc has shown a declining trend in receivables turnover from 6.59 in 2019 to 5.54 in 2023.
- A lower receivables turnover may suggest delays in collecting payments from customers or changes in credit policies.

3. Payables Turnover:
- The payables turnover ratio indicates how frequently a company pays its suppliers.
- nVent Electric plc's payables turnover has varied over the years, with a peak at 7.30 in 2020 and a decrease to 6.97 in 2023.
- A lower payables turnover may suggest changes in payment terms, supplier relationships, or liquidity management.

4. Working Capital Turnover:
- The working capital turnover ratio evaluates how effectively the company utilizes its working capital to generate sales.
- nVent Electric plc's working capital turnover has been inconsistent, with a significant drop in 2022 and a subsequent increase in 2023.
- A higher working capital turnover ratio generally indicates efficient utilization of resources to drive sales.

Overall, nVent Electric plc's activity ratios reflect varying levels of efficiency in managing inventory, receivables, payables, and working capital. It is important for the company to monitor these ratios consistently to identify areas for improvement and maintain financial health.

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Average number of days

nVent Electric plc's activity ratios provide insight into how efficiently the company is managing its inventory, accounts receivable, and accounts payable.

1. Days of Inventory on Hand (DOH):
- The DOH has shown an upward trend over the past five years, indicating that the company is taking longer to sell its inventory. This might suggest inefficiencies in inventory management, such as overstocking or slow-moving inventory.
- The increase in DOH from 2022 to 2023 is concerning as it indicates a decline in inventory turnover, which could tie up working capital and lead to increased holding costs.

2. Days of Sales Outstanding (DSO):
- The DSO represents the average number of days it takes for the company to collect payment from its customers. A lower DSO is generally preferred as it indicates faster collections and better liquidity.
- nVent Electric plc's DSO has shown fluctuations over the years but has generally been on an increasing trend. This suggests a potential issue with accounts receivable management and could lead to cash flow challenges.
- The increase in DSO from 2022 to 2023 indicates that the company is taking longer to collect payment from customers, which may necessitate improvements in credit policies or collection procedures.

3. Number of Days of Payables:
- The number of days of payables reflects how long the company takes to pay its suppliers. A higher number of days indicates a longer payment period, which can be beneficial for cash flow management.
- nVent Electric plc's days of payables have varied over the years but have been relatively stable. The slight increase in 2023 compared to 2022 may suggest the company is taking longer to pay its suppliers, potentially in an effort to preserve cash or improve working capital management.

In conclusion, nVent Electric plc's activity ratios indicate areas where the company may need to focus on improving efficiency in managing inventory, accounts receivable, and accounts payable to optimize working capital and overall financial performance.

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Long-term

nVent Electric plc's long-term activity ratios provide insights into the company's efficiency in utilizing its fixed assets and total assets to generate sales revenue.

Fixed asset turnover, which measures how efficiently the company generates sales from its investment in fixed assets, has fluctuated over the past five years. The ratio decreased from 10.06 in 2022 to 8.37 in 2023, indicating a potential decrease in the company's ability to generate sales relative to its investment in fixed assets. Despite this decrease, the ratio remains relatively high, suggesting that nVent Electric plc efficiently utilizes its fixed assets to generate revenue.

Total asset turnover, which reflects the company's ability to generate sales from all of its assets, including fixed and current assets, also fluctuated over the period. The ratio increased from 0.47 in 2019 to 0.53 in 2021 and 2023, with some variations in between. This increase indicates that nVent Electric plc has improved its overall asset utilization efficiency, generating more sales for each dollar of assets held.

In comparison to fixed asset turnover, the total asset turnover ratio is lower, suggesting that a significant portion of the company's assets are not actively contributing to revenue generation. nVent Electric plc may consider evaluating and optimizing the utilization of its total assets to improve this ratio further.

Overall, nVent Electric plc demonstrates a varying but generally efficient utilization of its fixed assets and total assets to generate sales, though there may be opportunities to further optimize asset utilization for improved long-term performance.