Otis Worldwide Corp (OTIS)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales and revenue. Looking at the activity ratios of Otis Worldwide Corp over the past eight quarters, we can observe some trends and patterns:

1. Inventory Turnover: Otis Worldwide Corp has been able to efficiently manage its inventory turnover, with a relatively consistent range between 15.12 to 16.78. This indicates that the company is effectively selling its inventory and replenishing it at a steady pace.

2. Receivables Turnover: The receivables turnover ratio has fluctuated slightly over the quarters, ranging from 3.96 to 4.45. This indicates the speed at which Otis Worldwide Corp collects on its credit sales. A higher ratio suggests faster collection of receivables.

3. Payables Turnover: The payables turnover ratio has also shown some variability, with values between 5.33 to 6.72. A lower ratio indicates a longer time taken by the company to settle its payables, which could have implications for liquidity and vendor relationships.

4. Working Capital Turnover: The working capital turnover ratio provides insight into how effectively Otis Worldwide Corp is utilizing its working capital to generate sales. However, the data provided does not include information for this ratio for Q1 2023 and the previous quarters.

Overall, while the company seems to manage its inventory efficiently and maintain relatively stable receivables turnover, fluctuations in payables turnover may require closer attention to optimize working capital management.

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Average number of days

Activity ratios provide insight into how efficiently a company manages its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
DOH measures how quickly a company can turn its inventory into sales. Otis Worldwide Corp's average DOH has been relatively consistent around 23 days over the last few quarters. A lower DOH is generally more favorable as it indicates that inventory is being sold quickly, reducing the risk of obsolescence or holding costs.

2. Days of Sales Outstanding (DSO):
DSO measures how long it takes for a company to collect payment after making a sale. Otis Worldwide Corp's DSO has fluctuated between 81 to 93 days over the last eight quarters, with a slight increase in the most recent quarter. A lower DSO is preferable, as it signifies quicker cash conversion and lower credit risk.

3. Number of Days of Payables:
This ratio reflects the number of days a company takes to pay its suppliers. Otis Worldwide Corp has shown variability in its payables period, ranging from around 54 to 68 days. A longer payables period can indicate favorable terms with suppliers, but it might also strain relationships if extended too far.

In conclusion, Otis Worldwide Corp should aim to lower its inventory holding period, reduce DSO, and carefully manage its payables cycle to improve working capital efficiency and overall financial health.

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Long-term

Otis Worldwide Corp's long-term activity ratios, specifically the fixed asset turnover and total asset turnover, indicate how efficiently the company is utilizing its assets to generate revenue.

Fixed asset turnover measures the company's ability to generate sales from its investment in fixed assets. The trend shows consistency in the range of 18.90 to 19.96 over the past eight quarters, with a peak of 19.96 in Q3 2022. This suggests that Otis Worldwide Corp is effectively utilizing its fixed assets to generate revenue and production efficiency has been relatively stable.

Total asset turnover measures the company's overall efficiency in generating sales from all assets. The trend shows fluctuation within a range of 1.21 to 1.48 over the past eight quarters. There is variability in this ratio, indicating that the efficiency of utilizing both fixed and current assets to generate sales has been inconsistent.

Overall, while the fixed asset turnover for Otis Worldwide Corp remains consistently high, indicating efficient utilization of fixed assets, the total asset turnover fluctuates, suggesting varying levels of efficiency in utilizing all assets to generate revenue. It is important for the company to identify the factors contributing to these fluctuations in total asset turnover and work towards maintaining more consistent efficiency in utilizing all assets for revenue generation.