Scotts Miracle-Gro Company (SMG)
Working capital turnover
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Revenue | US$ in thousands | 3,371,900 | 3,804,700 | 4,835,700 | 4,051,100 | 3,315,200 |
| Total current assets | US$ in thousands | 1,397,800 | 1,981,900 | 2,024,000 | 1,216,600 | 1,041,700 |
| Total current liabilities | US$ in thousands | 773,700 | 963,900 | 1,140,400 | 950,400 | 620,500 |
| Working capital turnover | 5.40 | 3.74 | 5.47 | 15.22 | 7.87 |
September 30, 2023 calculation
Working capital turnover = Revenue ÷ (Total current assets – Total current liabilities)
= $3,371,900K ÷ ($1,397,800K – $773,700K)
= 5.40
The working capital turnover ratio measures how effectively a company is using its working capital to generate sales revenue. Scotts Miracle-Gro Company's working capital turnover has fluctuated over the last five years, with a significant decrease from 15.52 in 2020 to 3.85 in 2022, followed by an increase to 5.69 in 2023.
The decreasing trend from 2020 to 2022 could indicate a slower conversion of working capital into sales, possibly due to inefficient management of inventory or receivables. However, the subsequent increase in 2023 suggests an improvement in the utilization of working capital to generate sales.
It is important to note that a high working capital turnover ratio may signify that the company is efficiently using its working capital to support sales growth. However, a very high ratio may also indicate an aggressive management of working capital that might lead to liquidity issues. Conversely, a low ratio might suggest inefficiency in utilizing the working capital.
In conclusion, while the recent increase in the working capital turnover ratio is a positive sign, further analysis is necessary to understand the underlying drivers of this change and its potential impact on the company's overall financial performance.
Peer comparison
Sep 30, 2023