Organon & Co (OGN)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|---|---|---|
| Inventory turnover | 3.49 | 3.76 | 3.59 | 3.77 | 4.13 | 4.71 | 4.35 | 4.36 | 4.55 |
| Receivables turnover | 3.59 | 3.73 | 3.69 | 4.25 | 4.19 | 4.37 | 4.27 | 4.81 | 4.56 |
| Payables turnover | 3.49 | 4.18 | 3.86 | 4.25 | 3.66 | 4.02 | 3.66 | 3.81 | 3.01 |
| Working capital turnover | 3.94 | 3.94 | 3.93 | 4.29 | 4.35 | 4.98 | 4.61 | 4.50 | 5.42 |
Organon & Co.'s activity ratios provide insight into the efficiency with which the company manages its assets and liabilities to generate revenue.
1. Inventory Turnover: The company's inventory turnover has been relatively stable around 2. This ratio indicates that Organon is turning over its inventory approximately 2 times a year on average. A decline in this ratio could suggest slower sales or excess inventory.
2. Receivables Turnover: Organon's receivables turnover has also been consistent, hovering around 4. This ratio reflects how quickly the company collects payment from its customers. A higher ratio indicates efficient collection practices, which is beneficial for cash flow management.
3. Payables Turnover: The payables turnover for Organon has fluctuated slightly but remains around 2. This ratio measures how quickly the company pays its suppliers. A lower ratio could indicate extended payment terms, while a higher ratio may suggest prompt payment practices.
4. Working Capital Turnover: The working capital turnover ratio has shown some variability but generally stays above 4. This ratio reflects the company's ability to generate revenue relative to its working capital. A higher ratio indicates efficient use of working capital to generate sales.
Overall, Organon & Co. appears to have a healthy balance in managing its assets and liabilities to drive revenue generation. It is important for the company to monitor these activity ratios regularly to ensure continued operational efficiency and financial health.
Average number of days
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 104.66 | 97.13 | 101.56 | 96.75 | 88.39 | 77.57 | 83.92 | 83.79 | 80.22 |
| Days of sales outstanding (DSO) | days | 101.64 | 97.81 | 98.94 | 85.83 | 87.20 | 83.53 | 85.58 | 75.81 | 80.02 |
| Number of days of payables | days | 104.58 | 87.38 | 94.45 | 85.96 | 99.75 | 90.72 | 99.82 | 95.74 | 121.17 |
Organon & Co.'s activity ratios show trends in the efficiency of its inventory management, accounts receivable collection, and accounts payable management over the past eight quarters.
1. Days of Inventory on Hand (DOH):
- The company's DOH has been gradually increasing over the quarters, indicating a trend of holding inventory for a longer period before it is sold.
- This may suggest potential issues with inventory turnover and liquidity, as inventory ties up capital and may become obsolete or perishable if held for too long.
- Organon & Co. should consider optimizing its inventory management practices to reduce the number of days inventory is held on hand.
2. Days of Sales Outstanding (DSO):
- The DSO for Organon & Co. has shown some fluctuations but generally remains within a relatively stable range.
- Lower DSO values indicate that the company is collecting accounts receivable more quickly, which is positive for cash flow management.
- However, there is room for improvement in accelerating the collection of outstanding receivables to optimize working capital efficiency.
3. Number of Days of Payables:
- The days of payables for the company have also shown variability but have been relatively consistent over the quarters.
- A higher number of days of payables suggests that Organon & Co. takes a longer time to pay its suppliers, potentially benefiting from extended credit terms.
- While delaying payments can provide a source of short-term financing, it is essential for the company to maintain positive relationships with suppliers and ensure timely payments to avoid any disruptions in the supply chain.
Overall, Organon & Co. should focus on balancing its inventory, accounts receivable, and accounts payable management to improve working capital efficiency and maintain healthy cash flow levels. Monitoring and optimizing these activity ratios can help the company enhance its financial performance and operational effectiveness.
Long-term
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|---|---|---|
| Fixed asset turnover | 5.29 | 5.61 | 5.56 | 5.82 | 6.06 | 6.94 | 6.68 | 6.56 | 6.48 |
| Total asset turnover | 0.52 | 0.56 | 0.56 | 0.57 | 0.56 | 0.60 | 0.60 | 0.60 | 0.59 |
Organon & Co.'s long-term activity ratios, namely Fixed Asset Turnover and Total Asset Turnover, provide insights into the efficiency with which the company utilizes its assets to generate sales revenue.
1. Fixed Asset Turnover:
- The Fixed Asset Turnover has been declining over the quarters, from 6.06 in Q4 2022 to 5.29 in Q4 2023. This suggests that Organon & Co. is generating fewer sales revenue per dollar of fixed assets invested.
- Despite the downward trend, the company's Fixed Asset Turnover remains relatively high, indicating that Organon is still efficiently utilizing its fixed assets to generate sales, although there may be room for improvement.
- The company should analyze the reasons behind the decreasing trend in Fixed Asset Turnover and consider strategies to optimize the utilization of its fixed assets to enhance overall productivity.
2. Total Asset Turnover:
- Similar to the Fixed Asset Turnover, the Total Asset Turnover has also shown a slight decline over the quarters, from 0.60 in Q1 2022 to 0.52 in Q4 2023. This indicates that the company is generating less sales revenue per dollar of total assets.
- Despite the decrease, Organon & Co.'s Total Asset Turnover is still within a reasonable range, implying that the company is efficiently utilizing its total assets to generate sales revenue.
- Management should continue monitoring the Total Asset Turnover ratio and assess whether adjustments are needed to enhance asset utilization efficiency, potentially through cost-effective operational strategies or investment decisions.
In conclusion, while Organon & Co. exhibits a decline in both Fixed Asset Turnover and Total Asset Turnover ratios over the recent quarters, the company still maintains a relatively efficient utilization of its assets. Continuous analysis and proactive measures to improve asset productivity could further enhance the company's overall operational performance and financial health.