JM Smucker Company (SJM)
Activity ratios
Short-term
Turnover ratios
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 6.58 | 7.33 | 6.48 | 6.97 | 7.36 |
| Receivables turnover | 11.10 | 14.26 | 15.37 | 15.16 | 14.08 |
| Payables turnover | 5.12 | 5.32 | 5.91 | 6.47 | 8.43 |
| Working capital turnover | — | 9.77 | 140.78 | — | 20.13 |
The activity ratios of JM Smucker Company provide insights into the efficiency of the company in managing its assets and liabilities.
1. Inventory Turnover: The inventory turnover ratio measures how efficiently the company manages its inventory by showing how many times in a year the inventory is sold and replaced. JM Smucker's inventory turnover has been relatively stable over the years, ranging from 6.48 to 7.36. A higher turnover indicates faster sales of inventory, which can be a positive sign of efficient operations.
2. Receivables Turnover: The receivables turnover ratio reflects how quickly the company collects cash from its credit sales. JM Smucker's receivables turnover has shown a decreasing trend over the years, from 15.37 in 2022 to 11.10 in 2024. A lower turnover may indicate slower collections, potentially impacting cash flow and liquidity.
3. Payables Turnover: The payables turnover ratio measures how quickly the company pays its suppliers. JM Smucker's payables turnover has shown a declining trend, from 8.43 in 2020 to 5.12 in 2024. A lower turnover could suggest that the company is taking longer to settle its payables, which may have implications for supplier relationships.
4. Working Capital Turnover: The working capital turnover ratio indicates how efficiently the company utilizes its working capital to generate sales. JM Smucker did not report a figure for this ratio in 2024 and 2021. In 2023, the ratio was very high at 140.78, indicating that the company generated significant sales with its working capital. However, such an exceptionally high ratio may also warrant further investigation to understand the underlying reasons.
Overall, JM Smucker Company's activity ratios provide valuable insights into its efficiency in managing inventory, receivables, payables, and working capital. Analyzing these ratios over time can help assess the company's operational performance and effectiveness in managing its assets and liabilities.
Average number of days
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 55.46 | 49.79 | 56.34 | 52.36 | 49.59 |
| Days of sales outstanding (DSO) | days | 32.88 | 25.59 | 23.74 | 24.07 | 25.93 |
| Number of days of payables | days | 71.33 | 68.66 | 61.72 | 56.41 | 43.32 |
The activity ratios of JM Smucker Company indicate the efficiency in managing its inventory, receivables, and payables over the past five years.
1. Days of Inventory on Hand (DOH): The trend shows fluctuations in the number of days it takes for the company to sell its inventory. In the latest fiscal year, the DOH increased to 55.46 days from the previous year's 49.79 days, suggesting an increase in the average length of time the company holds inventory before selling it. This may indicate slower inventory turnover, which could tie up more capital in inventory.
2. Days of Sales Outstanding (DSO): The DSO measures how long it takes for the company to collect payment after a sale. The data shows an upward trend in DSO over the years, with the highest being 32.88 days in the latest fiscal year. This implies that it is taking the company longer to collect payments from its customers, which could negatively impact cash flow and liquidity.
3. Number of Days of Payables: The trend in the number of days of payables indicates how long the company takes to pay its suppliers. There has been an increasing trend in this ratio over the years, with the number of days of payables reaching 71.33 days in the latest fiscal year. This indicates that the company has been taking longer to pay its suppliers, which could be seen as a positive for cash flow management but could also strain supplier relationships if extended too far.
Overall, JM Smucker Company may need to focus on improving its inventory management, accounts receivable collection processes, and optimizing payment terms with suppliers to enhance operational efficiency and cash flow management.
Long-term
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.66 | 3.81 | 3.78 | 4.04 | 3.94 |
| Total asset turnover | 0.40 | 0.57 | 0.50 | 0.50 | 0.46 |
The long-term activity ratios of JM Smucker Company reveal valuable insights into the efficiency of the company's asset utilization over the past five years.
1. Fixed Asset Turnover: This ratio indicates how effectively the company is utilizing its fixed assets to generate sales. A decreasing trend from 2020 to 2024 suggests that the company's fixed assets are being less efficiently utilized to drive revenue. The decreasing ratio may indicate excess capacity in fixed assets or a slowdown in sales growth relative to the investment in fixed assets.
2. Total Asset Turnover: This ratio measures the efficiency of the company in generating sales revenue relative to its total assets. JM Smucker Company has shown a fluctuating trend in total asset turnover over the five-year period. The company experienced an increase in 2021 and a subsequent decrease in 2022, with a slight improvement in 2023 and a drop in 2024. The overall trend indicates that the company's total assets are not consistently generating revenue at an optimal level.
In conclusion, JM Smucker Company may need to review its asset utilization strategies, particularly with fixed assets, to improve efficiency and maximize returns. A more consistent and efficient utilization of assets could lead to enhanced profitability and long-term sustainability for the company.