Scotts Miracle-Gro Company (SMG)
Activity ratios
Short-term
Turnover ratios
| Sep 30, 2024 | Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 5.65 | 4.13 | 3.20 | 3.79 | 5.82 |
| Receivables turnover | 20.10 | 11.08 | 12.72 | 10.00 | 8.53 |
| Payables turnover | 13.04 | 13.39 | 10.18 | 7.01 | 9.26 |
| Working capital turnover | 15.44 | 5.40 | 3.74 | 5.47 | 15.22 |
Activity ratios provide insight into how efficiently a company manages its assets and liabilities to generate sales and cash flow. Let's analyze the activity ratios of Scotts Miracle-Gro Company:
1. Inventory Turnover:
- The company's inventory turnover has been fluctuating over the past five years, with a peak in 2020 and a dip in 2022.
- This ratio indicates how well Scotts Miracle-Gro manages its inventory. A high turnover suggests efficient inventory management and potential sales growth opportunities.
2. Receivables Turnover:
- Scotts Miracle-Gro's receivables turnover has shown an increasing trend over the past five years, indicating that the company is collecting its accounts receivables more frequently.
- A higher receivables turnover signifies effective credit and collection policies, improving the company's cash flow cycle.
3. Payables Turnover:
- The payables turnover ratio has also varied year over year, with a notable increase in 2021.
- A higher payables turnover could indicate that the company is efficiently managing its accounts payable by paying suppliers more promptly.
4. Working Capital Turnover:
- The working capital turnover ratio has shown significant fluctuations, with a remarkable increase in 2024 compared to previous years.
- This ratio reflects how effectively Scotts Miracle-Gro utilizes its working capital to generate sales. A higher turnover suggests efficient use of resources to drive revenue.
In summary, based on the activity ratios, Scotts Miracle-Gro Company has shown improvements in managing its inventory, receivables, payables, and working capital efficiency over the past five years. However, there are fluctuations that may require further analysis to understand the underlying factors impacting the company's operational performance.
Average number of days
| Sep 30, 2024 | Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 64.57 | 88.45 | 113.98 | 96.24 | 62.67 |
| Days of sales outstanding (DSO) | days | 18.16 | 32.93 | 28.68 | 36.49 | 42.78 |
| Number of days of payables | days | 27.99 | 27.25 | 35.85 | 52.06 | 39.40 |
Analyzing the activity ratios of Scotts Miracle-Gro Company over the past five years reveals important insights into its operational efficiency.
1. Days of Inventory on Hand (DOH): The trend in DOH indicates the number of days it takes for the company to sell its inventory. A decreasing trend from 113.98 days in 2022 to 64.57 days in 2024 suggests improved inventory management efficiency. However, the fluctuation in DOH over the years implies possible challenges in inventory control.
2. Days of Sales Outstanding (DSO): DSO measures the average number of days it takes for a company to collect payment after a sale. The decreasing trend in DSO from 42.78 days in 2020 to 18.16 days in 2024 signals an improvement in the company's accounts receivable management. This reduction implies a more effective collection process and better credit policies.
3. Number of Days of Payables: This ratio evaluates how long the company takes to pay its suppliers. The trend shows fluctuations in the payment period over the years. A decreasing trend from 52.06 days in 2021 to 27.99 days in 2024 suggests a shorter payment period, potentially indicating stronger negotiation power with suppliers and improved liquidity management.
Overall, while there have been fluctuations in activity ratios, the general trend indicates an improvement in operational efficiency and financial management for Scotts Miracle-Gro Company. However, continued monitoring of these ratios is essential to ensure sustainable growth and profitability.
Long-term
| Sep 30, 2024 | Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 5.83 | 5.52 | 6.28 | 7.77 | 7.23 |
| Total asset turnover | 1.24 | 0.99 | 0.89 | 1.01 | 1.20 |
The fixed asset turnover ratio for Scotts Miracle-Gro Company has shown fluctuating trends over the past five years, ranging from 5.52 to 7.77. This ratio indicates the efficiency of the company in generating sales revenue from its investment in fixed assets. The increase in the fixed asset turnover ratio from 2020 to 2021 indicates that the company was able to generate more sales from its fixed assets in 2021 compared to the prior year. However, the subsequent decrease in this ratio in the following years suggests that the efficiency of generating sales from fixed assets has declined.
On the other hand, the total asset turnover ratio for Scotts Miracle-Gro has also shown variability over the same period, ranging from 0.89 to 1.24. This ratio measures the company's ability to generate sales from its total assets. The fluctuations in the total asset turnover ratio indicate changes in how effectively the company is utilizing its total assets to generate revenue. The increase in the ratio from 2020 to 2021 suggests improved efficiency in generating sales from total assets during that period.
In conclusion, the trends in both fixed asset turnover and total asset turnover ratios for Scotts Miracle-Gro Company indicate varying levels of efficiency in utilizing fixed and total assets to generate sales revenue over the past five years. It is important for the company to closely monitor these ratios and identify areas for improvement in asset utilization to enhance overall operational effectiveness.