Sherwin-Williams Co (SHW)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	8.47	7.32	8.97	8.60	5.22
Receivables turnover	9.14	8.48	8.29	8.66	8.57
Payables turnover	8.53	7.89	7.19	7.33	5.26
Working capital turnover	—	—	—	—	163.03

The activity ratios of Sherwin-Williams Co. indicate how effectively the company manages its assets and liabilities to generate revenue.

1. Inventory Turnover:
- The inventory turnover for Sherwin-Williams has been relatively stable over the past five years, ranging between 4.88 and 5.92 times a year. This suggests that the company is efficiently managing its inventory levels to meet demand and avoid excess holding costs.

2. Receivables Turnover:
- The receivables turnover has also shown consistency, indicating that Sherwin-Williams collects its accounts receivable efficiently. The ratio has ranged between 8.48 and 9.34 times per year, reflecting the company's effectiveness in managing credit sales and receivables collection.

3. Payables Turnover:
- Sherwin-Williams has effectively managed its accounts payable, with the turnover ratio ranging between 4.57 and 5.31 times a year over the past five years. A higher turnover ratio implies that the company is paying its suppliers more frequently, which can help maintain good relationships and potentially negotiate better terms.

4. Working Capital Turnover:
- The working capital turnover ratio for Sherwin-Williams was not provided for the years indicated. If available, this ratio would have provided insights into how efficiently the company utilizes its working capital to generate sales.

Overall, the activity ratios of Sherwin-Williams Co. highlight the company's efficiency in managing its inventory, receivables, and payables to support its operations and drive revenue growth 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	43.08	49.89	40.70	42.44	69.92
Days of sales outstanding (DSO)	days	39.93	43.05	44.05	42.13	42.59
Number of days of payables	days	42.80	46.28	50.75	49.82	69.42

Activity ratios are used to assess how efficiently a company manages its resources in terms of inventory, accounts receivable, and accounts payable. Let's analyze Sherwin-Williams Co.'s activity ratios based on the given data:

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows fluctuations over the last five years, ranging from a low of 61.69 days in 2021 to a high of 74.76 days in 2022.
- In 2023, Sherwin-Williams Co. held inventory for an average of 69.17 days, indicating that the company takes about 69 days to sell its inventory.
- A decrease in DOH over time may suggest more efficient inventory management, while an increase could indicate potential issues with overstocking or slow-moving inventory.

2. Days of Sales Outstanding (DSO):
- DSO has varied slightly over the years, with the lowest value of 39.08 days in 2023 and the highest of 43.05 days in 2021.
- A lower DSO implies that Sherwin-Williams Co. is collecting its accounts receivable more quickly, which is a positive sign for cash flow and liquidity.
- Consistent or decreasing DSO over time could indicate effective credit management practices.

3. Number of Days of Payables:
- The days of payables have fluctuated over the years, with a notable increase from 69.42 days in 2019 to 79.86 days in 2020 before decreasing to 68.73 days in 2023.
- A higher number of days of payables suggests that the company is taking longer to pay its suppliers, which can be advantageous for cash flow management.
- However, excessively delaying payments could strain supplier relationships and impact future credit terms.

In conclusion, analyzing Sherwin-Williams Co.'s activity ratios provides insight into how effectively the company is managing its inventory, accounts receivable, and accounts payable. Further investigation into the causes of any significant fluctuations in these ratios can help assess operational efficiency and financial health.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	7.95	9.85	10.44	9.81	9.75
Total asset turnover	0.98	0.96	0.94	0.88	0.87

The long-term activity ratios of Sherwin-Williams Co. indicate how efficiently the company is utilizing its assets to generate sales revenue over the years.

- Fixed asset turnover has fluctuated over the past five years, ranging from 8.13 to 10.68. This ratio signifies the company's ability to generate sales from its investment in fixed assets. A higher fixed asset turnover ratio indicates that the company is effectively utilizing its fixed assets to generate sales revenue. The decreasing trend in the fixed asset turnover ratio could suggest that the company's fixed assets are not being used as efficiently in recent years compared to the earlier years.

- Total asset turnover has shown a slight upward trend over the same period, increasing from 0.87 to 1.00. This ratio reflects how efficiently the company is generating sales from all its assets, both fixed and current. An increasing total asset turnover ratio can indicate improved overall asset utilization efficiency and better sales generation capability.

Overall, while the fixed asset turnover ratio fluctuated, the total asset turnover ratio showed a slight improvement. This suggests that Sherwin-Williams Co. has been more effective in utilizing its total assets, including fixed assets, to generate sales revenue. However, the company may need to focus on optimizing the utilization of its fixed assets to ensure sustainable growth and profitability in the long term.