Snap-On Inc (SNA)

Short-term

Turnover ratios

Snap-On Inc's activity ratios provide insights into how efficiently the company manages its assets and liabilities to generate sales.

1. Inventory Turnover: The inventory turnover ratio has been declining from 0.16 in 2020 to 0.13 in 2024. This trend indicates that Snap-On Inc is holding onto its inventory for a longer period before selling it, which may suggest potential issues with inventory management or slow sales.

2. Receivables Turnover: The receivables turnover ratio has remained relatively stable, ranging from 3.07 in 2020 to 3.30 in 2024. This indicates that Snap-On Inc efficiently collects payments from customers, translating sales into cash effectively.

3. Payables Turnover: The payables turnover ratio has fluctuated, showing a decrease from 0.54 in 2020 to 0.45 in 2024. A lower payables turnover may imply that the company is taking longer to pay its suppliers, which could impact supplier relationships or cash flow management.

4. Working Capital Turnover: The working capital turnover ratio has been gradually decreasing from 2.06 in 2020 to 1.69 in 2024. This suggests that Snap-On Inc is generating fewer sales relative to its working capital, indicating potential inefficiencies in asset utilization or sales generation.

Overall, while the company's receivables turnover remains stable, its inventory turnover, payables turnover, and working capital turnover ratios show some areas where operational efficiency could be improved, particularly in managing inventory levels, supplier payments, and working capital utilization.

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Average number of days

The analysis of Snap-On Inc's activity ratios reveals trends in the efficiency of its operations.

1. Days of Inventory on Hand (DOH):
- Snap-On Inc's DOH has shown an increasing trend from 2,283.93 days in 2020 to 5,303.54 days in 2022, before decreasing to 2,905.83 days in 2024.
- The sharp increase in 2022 indicates that the company may have been holding excessive inventory relative to its sales level, potentially tying up working capital.
- The subsequent decline in 2024 suggests a better inventory management strategy may have been implemented to reduce excess inventory levels.

2. Days of Sales Outstanding (DSO):
- The DSO for Snap-On Inc decreased initially from 118.83 days in 2020 to 105.89 days in 2021, before showing a slight increase to 110.46 days in 2024.
- A lower DSO indicates that the company is collecting its accounts receivable more quickly, which is a positive sign of efficient credit management.
- The slight increase in DSO in 2024 may warrant further investigation to ensure that the company's credit policies are still effective.

3. Number of Days of Payables:
- Snap-On Inc's days of payables have fluctuated over the years, ranging from 681.97 days in 2020 to 819.02 days in 2024.
- A higher number of days of payables suggests that the company is taking longer to pay its suppliers, possibly benefiting from extended credit terms.
- The fluctuations in days of payables may indicate variations in the company's working capital management practices or supplier relationships.

Overall, the company's activity ratios indicate areas where operational efficiency can be improved, such as optimizing inventory levels, monitoring accounts receivable collections, and managing payables effectively to support cash flow and working capital management.

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Long-term

Snap-On Inc's long-term activity ratios show an improvement in both the Fixed Asset Turnover and Total Asset Turnover over the period from December 31, 2020, to December 31, 2024.

The Fixed Asset Turnover ratio, which indicates how efficiently the company is utilizing its fixed assets to generate sales, increased from 7.59 in 2020 to 9.44 in 2024. This indicates that Snap-On Inc generated more revenue from its fixed assets each year, signaling improved efficiency in asset utilization.

Similarly, the Total Asset Turnover ratio, which measures the company's ability to generate sales relative to its total assets, also saw an uptrend from 0.60 in 2020 to 0.65 in 2024. This indicates that Snap-On Inc effectively utilized its total assets to generate sales, although the increase was not as significant as in the Fixed Asset Turnover ratio.

Overall, the increasing trend in both ratios suggests that Snap-On Inc has been successful in improving its asset efficiency and generating more sales from its asset base over the analyzed period. This could indicate better productivity and operational performance in utilizing its assets to drive revenue growth.