Phillips 66 (PSX)

Working capital turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Revenue	US$ in thousands	146,507,000	178,483,000	114,646,000	65,436,000	110,275,000
Total current assets	US$ in thousands	19,941,000	21,922,000	14,697,000	13,276,000	14,395,000
Total current liabilities	US$ in thousands	15,856,000	15,889,000	12,801,000	9,518,000	11,646,000
Working capital turnover		35.86	29.58	60.47	17.41	40.11

December 31, 2023 calculation

Working capital turnover = Revenue ÷ (Total current assets – Total current liabilities)
= $146,507,000K ÷ ($19,941,000K – $15,856,000K)
= 35.86

Working capital turnover is a financial ratio that measures a company's efficiency in utilizing its working capital to generate sales revenue. A higher working capital turnover indicates that the company is effectively managing its working capital to generate sales.

Upon analyzing Phillips 66's working capital turnover over the past five years, we observe fluctuations in the ratio. In 2023, the working capital turnover ratio stood at 36.08, indicating an increase compared to the previous year. This suggests that Phillips 66 efficiently utilized its working capital to generate sales revenue in 2023.

In contrast, in 2022 and 2021, the working capital turnover ratios decreased to 28.18 and 58.80, respectively. The significant decrease in 2022 might be a cause of concern, indicating potential inefficiencies in working capital management. However, the sharp increase in 2021 suggests a strong performance in utilizing working capital to generate sales.

In 2020 and 2019, the working capital turnover ratios were 17.06 and 39.07, respectively. The lower ratio in 2020 might indicate challenges in working capital management compared to previous years. However, the ratio in 2019 showed a healthier utilization of working capital for generating sales.

Overall, while there have been fluctuations in Phillips 66's working capital turnover ratio over the past five years, it is essential for the company to consistently focus on optimizing its working capital management to maintain efficient operations and drive sales growth.