Organon & Co (OGN)

Short-term

Turnover ratios

Organon & Co.'s activity ratios provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover: The inventory turnover ratio measures how efficiently a company manages its inventory by showing how many times a company sells and replaces its inventory during a period. Organon & Co.'s inventory turnover has been gradually declining from 2.60 in 2021 to 1.91 in 2023. This suggests that the company is holding onto its inventory for longer periods, which may tie up capital and increase holding costs.

2. Receivables Turnover: The receivables turnover ratio indicates how quickly the company is able to collect payments from its customers. Organon & Co. has seen a decreasing trend in its receivables turnover ratio from 6.05 in 2020 to 3.59 in 2023. This could indicate potential issues with the company's credit policies or the quality of its debtor accounts.

3. Payables Turnover: The payables turnover ratio shows how efficiently a company pays its suppliers. Organon & Co.'s payables turnover ratio has fluctuated, with a significant decrease in 2020 and a subsequent increase in 2021. The company's payables turnover ratio was 1.91 in 2023, indicating that the company takes approximately 1.91 years to pay its suppliers. A low payables turnover ratio may suggest that the company is taking longer to settle its payables or may be in a better negotiating position with its suppliers.

4. Working Capital Turnover: The working capital turnover ratio demonstrates how efficiently the company is utilizing its working capital to generate sales revenue. Organon & Co.'s working capital turnover ratio has been relatively stable over the years, indicating that the company is effectively using its working capital to generate sales.

Overall, a declining trend in inventory turnover and receivables turnover ratios may indicate potential inefficiencies in managing inventory and collecting payments. However, the stable working capital turnover ratio suggests that despite these challenges, the company is effectively utilizing its working capital to drive sales. Additionally, the payables turnover ratio reflects the company's payment practices and relationship with its suppliers, which have shown some fluctuations over the years.

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Average number of days

The activity ratios of Organon & Co. provide insights into the efficiency of its operations related to inventory management, accounts receivables collection, and accounts payables management over the past five years.

1. Days of Inventory on Hand (DOH): Organon & Co. has shown an increasing trend in the days of inventory on hand from 2019 to 2023, indicating that the company is holding its inventory for a longer period. This could be a signal of potential issues such as overstocking, slow-moving inventory, or inefficiencies in the supply chain.

2. Days of Sales Outstanding (DSO): The days of sales outstanding have seen fluctuations over the years but generally increased from 2019 to 2023. This suggests that the company is taking longer to collect payments from its customers, which could impact its cash flow and working capital management. It may also indicate potential credit risks associated with the company's customers.

3. Number of Days of Payables: The number of days of payables has shown significant variability over the years, with a notable increase in 2021 followed by a decrease in subsequent years. A high number of days of payables may indicate that the company is taking longer to pay its suppliers, potentially straining supplier relationships or taking advantage of extended payment terms. Conversely, a low number of days of payables could suggest efficient payables management.

Overall, the analysis of Organon & Co.'s activity ratios highlights the importance of monitoring and managing inventory levels, accounts receivables collection, and accounts payables to ensure operational efficiency and effectiveness in the company's supply chain and working capital management.

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Long-term

Organon & Co.'s long-term activity ratios provide insights into the efficiency of the company in generating sales from its fixed assets and total assets. The fixed asset turnover ratio has displayed a declining trend over the past five years, indicating that the company is generating fewer sales relative to its investment in fixed assets. Specifically, the fixed asset turnover has decreased from 11.44 in 2019 to 5.29 in 2023, suggesting a decline in the efficiency of utilizing fixed assets to generate revenue.

Similarly, the total asset turnover has also exhibited a downward trajectory, reflecting a decrease in the company's ability to generate sales from its total assets. The total asset turnover ratio has decreased from 0.74 in 2019 to 0.52 in 2023, indicating a reduction in the efficiency of utilizing all assets, including fixed and current assets, to generate revenue.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios implies that Organon & Co. may be experiencing challenges in efficiently utilizing its assets to drive sales growth. Further analysis and exploration into the factors contributing to these trends would be necessary to assess the company's long-term operational efficiency and asset utilization strategies.