Philip Morris International Inc (PM)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	1.41	1.25	1.40	1.19	1.38
Receivables turnover	7.70	21.18	26.08	26.00	26.06
Payables turnover	3.67	3.04	3.65	4.11	5.53
Working capital turnover	—	—	—	57.15	65.74

Activity ratios provide insights into how effectively a company is managing its resources and generating revenues. Let's analyze the activity ratios of Philip Morris International Inc based on the given data:

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a given period.
- Philip Morris International's inventory turnover has fluctuated over the past five years, ranging from 1.00 to 1.20.
- A low inventory turnover may indicate overstocking or slow sales, while a high ratio suggests efficient inventory management.

2. Receivables Turnover:
- The receivables turnover ratio shows how quickly a company collects its accounts receivable.
- Philip Morris International's receivables turnover has been relatively high, ranging from 6.68 to 8.02 over the past five years.
- A high receivables turnover indicates effective credit management and timely collection of receivables.

3. Payables Turnover:
- The payables turnover ratio evaluates how quickly a company pays its creditors.
- Philip Morris International's payables turnover has varied from 2.80 to 4.57 over the last five years.
- A higher payables turnover ratio signifies that the company is paying its suppliers more quickly, which could potentially strain cash flows.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how efficiently a company uses its working capital to generate sales.
- Philip Morris International's working capital turnover was not provided for the years 2023, 2022, and 2021, but it was relatively high in 2020 and 2019 (15.29 and 17.73, respectively).
- A high working capital turnover indicates that the company is efficiently utilizing its current assets to drive revenue generation.

Overall, analyzing these activity ratios provides valuable insights into Philip Morris International's operational efficiency, inventory management, credit policies, and working capital utilization over the years.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	258.60	291.05	261.61	306.19	265.04
Days of sales outstanding (DSO)	days	47.41	17.23	13.99	14.04	14.01
Number of days of payables	days	99.44	120.00	99.94	88.75	65.98

Activity ratios provide insight into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of Philip Morris International Inc based on the information provided.

1. Days of Inventory on Hand (DOH): This ratio indicates how many days, on average, the company holds its inventory before selling it. A lower DOH is favorable as it implies faster inventory turnover. In the given data, Philip Morris International Inc's DOH has fluctuated over the years, with 2020 showing the highest number of days (365.84) and 2023 the lowest (305.01), indicating an improvement in inventory management efficiency.

2. Days of Sales Outstanding (DSO): DSO measures the average number of days it takes for the company to collect its accounts receivable. A lower DSO implies quicker conversion of sales into cash. Philip Morris International Inc's DSO has varied, with fluctuations seen over the years. Notably, 2022 had the highest DSO (54.65 days), while 2021 showed a decrease to 45.79 days, suggesting enhanced collection efficiency.

3. Number of Days of Payables: This ratio reflects the average number of days the company takes to pay its suppliers. A higher number of days indicates that the company is taking longer to settle its payables. In the provided data, Philip Morris International Inc's number of days of payables has increased over the years, with 2019 showing the lowest value (79.82 days) and 2022 the highest (130.48), indicating a potential delay in payment to suppliers.

Overall, analyzing these activity ratios together can provide a comprehensive view of how effectively Philip Morris International Inc is managing its working capital and operating cycle. Continual monitoring and improvement in these ratios are essential for enhancing operational efficiency and overall financial performance.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	4.57	17.50	19.19	16.85	16.66
Total asset turnover	0.52	1.87	2.82	2.39	2.58

The long-term activity ratios of Philip Morris International Inc indicate the efficiency with which the company utilizes its long-term assets to generate sales. The fixed asset turnover ratio has shown a slight decline over the past five years, from 4.73 in 2022 to 4.68 in 2023. This ratio signifies that for every dollar invested in fixed assets, the company generates $4.68 of sales. Despite the minor decrease, the company's fixed asset turnover remains relatively stable and reflective of effective asset utilization.

In contrast, the total asset turnover ratio has fluctuated more significantly over the same period. It decreased from 0.70 in 2019 to 0.54 in 2023, with notable variations in between. This ratio indicates how efficiently the company generates sales from all its assets, including both long-term and short-term. The decline in total asset turnover may suggest inefficiencies in utilizing assets to generate revenue, which could be a concern for the company's operational efficiency.

Overall, while the fixed asset turnover ratio remains relatively stable, the declining trend in the total asset turnover ratio warrants further analysis to understand the factors contributing to the fluctuation and to identify potential areas for improvement in asset utilization and operational performance.