Raytheon Technologies Corp (RTX)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	0.52	0.54	0.64	5.11	3.82
Receivables turnover	6.36	7.36	6.66	6.11	5.19
Payables turnover	0.57	0.58	0.67	5.56	4.43
Working capital turnover	41.62	20.15	9.75	7.52	3.03

Inventory turnover measures how efficiently a company manages its inventory. RTX Corp's inventory turnover has been fluctuating over the past five years, ranging from 4.83 to 5.65. This indicates that the company is selling and replacing its inventory approximately 5 times a year, which suggests a moderate level of efficiency in inventory management.

Receivables turnover assesses how effectively a company collects payments from its customers. RTX Corp's receivables turnover has also shown variability, with figures ranging from 5.70 to 7.36 over the same period. This suggests that the company collects payments from customers approximately 6 to 7 times a year, indicating a satisfactory ability to manage its accounts receivable.

Payables turnover evaluates how quickly a company pays its suppliers. RTX Corp's payables turnover has fluctuated between 5.28 and 5.93, indicating that the company pays its suppliers approximately 5 to 6 times a year. This reflects a consistent payment pattern, suggesting that RTX Corp maintains a stable relationship with its suppliers.

Working capital turnover measures how efficiently a company utilizes its working capital to generate sales. RTX Corp's working capital turnover has demonstrated significant variability, with a notable increase in recent years from 7.52 in 2020 to 41.62 in 2023. This substantial improvement indicates that the company has been more efficient in utilizing its working capital to generate revenue.

In summary, RTX Corp has shown moderate to satisfactory efficiency in managing its inventory, collecting payments from customers, paying suppliers, and utilizing working capital to generate sales over the past five years. The fluctuations in these activity ratios suggest that the company has made adjustments in its operational processes to improve efficiency and performance.

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	703.08	676.18	571.47	71.48	95.44
Days of sales outstanding (DSO)	days	57.40	49.56	54.77	59.69	70.37
Number of days of payables	days	638.66	630.26	544.88	65.62	82.46

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of RTX Corp over the past five years:

1. Days of Inventory on Hand (DOH):
- RTX Corp's DOH has shown an increasing trend from 70.04 days in 2019 to 75.64 days in 2023.
- This indicates that the company is holding inventory for a longer period, which may tie up cash and increase storage costs.
- A higher DOH may also suggest inefficiencies in inventory management or a slow turnover of inventory.

2. Days of Sales Outstanding (DSO):
- RTX Corp's DSO has fluctuated over the years but generally decreased from 64.07 days in 2019 to 57.40 days in 2023.
- A decreasing DSO indicates that the company is collecting its accounts receivable more quickly, improving its cash flow.
- However, variations in DSO may also reflect changes in sales terms or the creditworthiness of customers.

3. Number of Days of Payables:
- The number of days of payables for RTX Corp has shown slight fluctuations over the years, ranging from 61.55 days in 2021 to 69.14 days in 2019.
- A longer payment period may indicate that the company is able to delay payments to suppliers, preserving cash for other uses.
- However, excessively long payment periods may strain relationships with suppliers or signal financial distress.

In conclusion, RTX Corp should focus on optimizing its inventory management to reduce the DOH, maintain efficient collections to keep DSO in check, and balance payables to manage cash flow effectively. Periodic monitoring and improvement in these activity ratios can help the company enhance its overall operational efficiency and financial performance.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	4.38	4.42	4.30	3.78	4.39
Total asset turnover	0.43	0.42	0.40	0.35	0.32

The long-term activity ratios of RTX Corp, specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in utilizing its assets to generate sales revenue.

1. Fixed Asset Turnover:
- RTX Corp's fixed asset turnover has been relatively stable over the past five years, ranging from 3.78 to 6.04. This ratio indicates that for every dollar invested in fixed assets, the company generates between $3.78 and $6.04 in sales revenue.
- A higher fixed asset turnover ratio signifies better efficiency in utilizing fixed assets to generate sales. RTX Corp's consistent values around 4 suggest a relatively efficient utilization of its long-term assets.
- The slight fluctuations in the ratio over the years are generally acceptable and may reflect changes in business operations or asset utilization strategies.

2. Total Asset Turnover:
- The total asset turnover for RTX Corp has also shown consistency over the years, ranging from 0.35 to 0.55. This ratio reflects the company's ability to generate sales revenue in relation to its total assets.
- A lower total asset turnover ratio indicates that the company requires a higher level of assets to generate each dollar of sales. RTX Corp's values around 0.4 suggest that the company has been able to generate sales efficiently relative to its total asset base.
- It's notable that total asset turnover has been relatively stable, indicating a consistent level of efficiency in utilizing all assets, including both fixed and current, to drive revenue generation.

Overall, the long-term activity ratios of RTX Corp demonstrate a reasonable level of asset utilization efficiency, as reflected in its stable fixed asset turnover and total asset turnover ratios over the past five years. The company appears to have effectively managed and utilized its assets to drive sales revenue, which is a positive indicator of operational efficiency.