Phillips 66 (PSX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 34.91 | 47.00 | 31.52 | 16.68 | 26.33 |
| Receivables turnover | 12.49 | 16.25 | 14.57 | 8.16 | 12.96 |
| Payables turnover | — | 14.33 | 14.02 | 12.55 | 12.36 |
| Working capital turnover | 35.86 | 29.58 | 60.47 | 17.41 | 40.11 |
Activity ratios provide insights into how efficiently a company manages its assets and liabilities.
1. Inventory Turnover: Phillips 66's inventory turnover has been consistently high over the past five years, indicating that the company is efficiently selling its inventory. A higher turnover ratio suggests that the company is selling its products quickly, which can help prevent inventory obsolescence and minimize carrying costs.
2. Receivables Turnover: The receivables turnover ratio measures how effectively a company is collecting payments from its customers. Phillips 66 has shown a relatively stable receivables turnover ratio over the period, indicating efficiency in collecting payments from customers. A high turnover ratio suggests that the company has effective credit and collection policies in place.
3. Payables Turnover: The payables turnover ratio reflects how quickly a company pays its suppliers. Phillips 66's payables turnover has remained relatively steady, indicating a consistent payment schedule to suppliers. A higher turnover ratio may suggest that the company is efficiently managing its payables and maintaining good relationships with suppliers.
4. Working Capital Turnover: This ratio measures how efficiently a company generates revenue with its working capital. Phillips 66 has shown fluctuations in its working capital turnover over the years, with a significant increase in 2021. A higher turnover ratio indicates that the company is generating more revenue relative to its working capital, reflecting efficient utilization of its resources to drive sales.
In summary, Phillips 66 has demonstrated efficient management of its inventory, receivables, payables, and working capital over the years, which is essential for sustaining operational performance and maintaining healthy cash flows.
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 | 10.46 | 7.77 | 11.58 | 21.89 | 13.86 |
| Days of sales outstanding (DSO) | days | 29.22 | 22.46 | 25.06 | 44.75 | 28.17 |
| Number of days of payables | days | — | 25.48 | 26.03 | 29.07 | 29.52 |
Activity ratios provide insights into how efficiently a company is managing its assets and liabilities. Let's analyze Phillips 66's activity ratios based on the provided data for the past five years.
Days of Inventory on Hand (DOH):
- Phillips 66's DOH has fluctuated over the past five years, from as low as 7.98 days in 2022 to as high as 24.62 days in 2020.
- A lower DOH indicates that the company is efficient in managing its inventory levels, while a higher DOH may suggest slower inventory turnover.
- Overall, the trend in DOH shows some variation, but the company has managed to keep the metric within a reasonable range in recent years.
Days of Sales Outstanding (DSO):
- The DSO measures how long it takes for the company to collect revenue from its credit sales.
- Phillips 66's DSO has also varied over the years, with the highest DSO of 37.12 days in 2020.
- A lower DSO is generally favorable as it signifies quicker collections and better liquidity, while a higher DSO could indicate potential issues with accounts receivable management.
- The trend in DSO for Phillips 66 shows some improvement in recent years, with decreasing values suggesting more efficient collection of sales proceeds.
Number of Days of Payables:
- The number of days of payables measures how long it takes for the company to pay its suppliers.
- Phillips 66's payables days have been relatively stable over the past five years, with minor fluctuations between 27.57 days to 35.10 days.
- A higher number of days of payables may imply that the company is effectively utilizing its trade credit terms, while a sudden increase could raise concerns about liquidity and vendor relationships.
- Overall, the consistent trend in payables days for Phillips 66 indicates a stable approach to managing its accounts payable.
In conclusion, the analysis of Phillips 66's activity ratios suggests that the company has maintained a reasonable balance between inventory management, accounts receivable collection, and accounts payable turnover over the years. Continued monitoring of these ratios will be essential to ensure operational efficiency and financial health.
See also:
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.14 | 5.11 | 5.17 | 2.79 | 4.69 |
| Total asset turnover | 1.94 | 2.33 | 2.06 | 1.20 | 1.88 |
Phillips 66's fixed asset turnover ratio has shown fluctuations over the past five years. In 2023, the company's fixed asset turnover decreased to 4.13 from 4.83 in 2022 and 4.97 in 2021, indicating a decline in the efficiency of generating sales from fixed assets. However, the ratio is still relatively high compared to 2020 and 2019, suggesting that the company was able to utilize its fixed assets more effectively in 2023.
On the other hand, the total asset turnover ratio reflects the efficiency of the company in generating sales from all its assets. Phillips 66's total asset turnover has also fluctuated over the past five years, reaching its peak in 2022 at 2.22 and dropping to 1.95 in 2023. Despite the decrease in 2023, the company has generally shown an improvement in utilizing its total assets efficiently to generate revenue compared to the lower ratios in 2020 and 2019.
Overall, while there have been fluctuations in both the fixed asset turnover and total asset turnover ratios, Phillips 66 has demonstrated a reasonable efficiency in utilizing its assets to generate sales over the past five years. The management should continue monitoring these ratios to ensure optimal asset utilization and sustainable business performance.