Otis Worldwide Corp (OTIS)

Short-term

Turnover ratios

The activity ratios of Otis Worldwide Corp provide insights into the efficiency of the company's operations and management of working capital.

1. Inventory Turnover: This ratio indicates how many times a company's inventory is sold and replaced over a period. Otis Worldwide Corp has maintained a relatively stable inventory turnover over the years, ranging between approximately 13.62 to 16.37 times. A higher turnover generally indicates efficient inventory management.

2. Receivables Turnover: This ratio shows how many times a company collects its accounts receivable during a period. Otis Worldwide Corp's receivables turnover has been consistent around 4 times annually, indicating a steady collection process. A higher turnover is generally preferable, as it suggests quick conversion of credit sales into cash.

3. Payables Turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Otis Worldwide Corp's payables turnover has shown a declining trend over the years, from about 6.98 in 2019 to 5.33 in 2023. A lower turnover may indicate a longer payment cycle, potentially affecting relationships with suppliers.

4. Working Capital Turnover: This ratio reflects how efficiently a company uses its working capital to generate sales revenue. Otis Worldwide Corp had a significant decrease in working capital turnover from 46.19 in 2019 to not being calculated in recent years. A higher turnover suggests effective utilization of working capital to drive sales.

In conclusion, Otis Worldwide Corp showcases consistent inventory and receivables turnover, indicating good management of inventory and efficient collection of receivables. However, the declining trend in payables turnover warrants attention to ensure healthy supplier relationships. The significant drop in working capital turnover requires further investigation to understand the impact on overall operational efficiency and sales generation.

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Average number of days

Otis Worldwide Corp's activity ratios provide insights into the efficiency of its inventory management, accounts receivable collection, and accounts payable turnover.

1. Days of Inventory on Hand (DOH): The DOH ratio measures how efficiently Otis manages its inventory. A lower DOH indicates that the company is selling its inventory quickly, which is generally considered positive. Over the past five years, Otis's DOH has fluctuated, showing some variability in its inventory management efficiency. In 2020, the DOH increased significantly, suggesting a potential slowdown in inventory turnover, but it improved in 2023 compared to the previous year.

2. Days of Sales Outstanding (DSO): The DSO ratio reflects how quickly Otis collects payments from its customers. A lower DSO indicates that the company is collecting its accounts receivable faster, which is favorable. Otis's DSO has fluctuated over the years, with some volatility in its receivables collection efficiency. The increase in DSO in 2023 compared to the previous year suggests a potential delay in collecting payments from customers.

3. Number of Days of Payables: This ratio indicates how long Otis takes to pay its suppliers. A longer payment period can indicate a more favorable position for the company as it can use its suppliers' funds for a longer period. Otis has shown an increasing trend in the number of days of payables over the past five years, which may imply that the company is taking longer to pay its suppliers. This trend indicates a potential improvement in cash flow management as Otis is utilizing a longer payment period.

Overall, by analyzing the activity ratios of Otis Worldwide Corp, it appears that the company has shown some variability in its efficiency in managing inventory, collecting receivables, and paying its suppliers over the past five years. Investors and analysts should closely monitor these ratios to assess the company's operational efficiency and working capital management.

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Long-term

The fixed asset turnover ratio for Otis Worldwide Corp has shown a consistent increasing trend from 2019 to 2023, indicating that the company is generating more revenue per dollar invested in fixed assets each year. This suggests a higher efficiency in utilizing its fixed assets to generate sales.

On the other hand, the total asset turnover ratio fluctuates slightly over the same period, with a peak in 2021. Despite the fluctuations, the ratio has generally been above 1, indicating that Otis Worldwide Corp is generating more revenue relative to its total assets. However, the decreasing trend in recent years may signal challenges in efficiently using its total assets to generate sales.

Overall, the company's performance in terms of long-term activity ratios suggests that it has been effectively managing its fixed assets to drive revenue growth, although there may be opportunities to improve the efficiency of its total asset utilization.