Solventum Corp. (SOLV)

Short-term

Turnover ratios

Inventory Turnover Ratio Analysis:

The inventory turnover ratio measures how efficiently a company manages its inventory by showing how many times in a year it sells and replaces its average inventory. Solventum Corp.'s inventory turnover has shown a relatively consistent uptrend from December 2022 to September 2024, ranging from 3.79 to 4.19. This suggests that the company is selling its inventory more frequently over time.

Receivables Turnover Ratio Analysis:

The receivables turnover ratio indicates how efficiently a company collects its outstanding credit sales during a specific period. In this case, Solventum Corp.'s receivables turnover data is unavailable for analysis across all the reported periods. This lack of data makes it challenging to assess the company's effectiveness in collecting its receivables.

Payables Turnover Ratio Analysis:

The payables turnover ratio evaluates how efficiently a company manages its payments to suppliers by showing how many times its payables are paid during a period. Solventum Corp.'s payables turnover data is not provided for analysis, leading to a gap in understanding the company's payment practices.

Working Capital Turnover Ratio Analysis:

The working capital turnover ratio measures how effectively a company generates revenue in relation to its working capital. Solventum Corp.'s working capital turnover has fluctuated significantly during the periods reported, ranging from 5.45 to 18.39. The sharp variations in this ratio indicate fluctuations in the efficiency of utilizing working capital to generate sales. The highest turnover ratio in September 2024 suggests a significant improvement in sales generation efficiency compared to previous periods.

In conclusion, while Solventum Corp.'s inventory turnover shows a positive trend, the lack of data for receivables and payables turnover limits a comprehensive analysis of its activity ratios. The fluctuating working capital turnover highlights the company's varying efficiency in generating revenue relative to its working capital. For a more comprehensive assessment, additional information on receivables and payables turnover would be beneficial.

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Average number of days

Based on the data provided for Solventum Corp., let's analyze the activity ratios:

1. Days of Inventory on Hand (DOH):
- Solventum Corp.'s average number of days of inventory on hand ranged from around 87 to 96 days over the period examined.
- The DOH decreased slightly from December 2022 to September 2023, before showing some fluctuation in the subsequent periods.
- A lower DOH indicates that inventory turnover is more efficient, whereas a higher DOH may suggest excess inventory holding.

2. Days of Sales Outstanding (DSO):
- The data does not provide information on the Days of Sales Outstanding for Solventum Corp.
- DSO is an important metric that reflects the average number of days it takes for a company to collect revenue after a sale is made.

3. Number of Days of Payables:
- The data does not provide any information on the Number of Days of Payables for Solventum Corp.
- This ratio would typically show how long it takes for a company to pay its suppliers.

In conclusion, while we have a clear view of the Days of Inventory on Hand for Solventum Corp., the absence of data on Days of Sales Outstanding and Number of Days of Payables limits our ability to provide a comprehensive analysis of all key activity ratios. It may be beneficial to gather additional data or explore other financial ratios to holistically assess the company's operational efficiency and working capital management.

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Long-term

Solventum Corp.'s long-term activity ratios provide insight into how efficiently the company is utilizing its assets to generate sales over a period of time.

1. Fixed Asset Turnover: The fixed asset turnover ratio measures how effectively a company is using its fixed assets to generate revenue. A higher ratio indicates better utilization of fixed assets. In this case, the data shows that the fixed asset turnover ratio for Solventum Corp. is unavailable for the periods presented. Therefore, it is not possible to assess how efficiently the company is utilizing its fixed assets to generate sales.

2. Total Asset Turnover: The total asset turnover ratio measures how efficiently a company is using its total assets to generate revenue. A higher ratio suggests that the company is generating more sales per dollar of assets. In Solventum Corp.'s case, the total asset turnover ratio shows a slight decline from 0.60 on December 31, 2022, to 0.57 by December 31, 2024. This indicates that the company may be becoming less efficient in generating sales relative to its total asset base over the period under review.

In summary, while the fixed asset turnover ratio data is unavailable for analysis, the trend in the total asset turnover ratio suggests a slight decrease in efficiency in utilizing total assets to generate sales for Solventum Corp. It is important for the company to monitor and improve these ratios to ensure optimal utilization of assets and maximize revenue generation.