Sonoco Products Company (SON)

Short-term

Turnover ratios

The activity ratios of Sonoco Products Co. provide insights into the company's efficiency in managing its assets and liabilities.

1. Inventory Turnover:
- The inventory turnover ratio indicates how many times a company sells and replaces its inventory during a specific period.
- Sonoco's inventory turnover has ranged between 5.30 and 9.30 over the past five years, with the highest turnover recorded in 2020.
- The company's inventory turnover has been relatively stable, suggesting efficient management of inventory levels.

2. Receivables Turnover:
- The receivables turnover ratio reflects how quickly a company collects its accounts receivables from customers.
- Sonoco's receivables turnover has fluctuated between 6.57 and 7.54, indicating that the company has been successful in collecting payments from customers in a timely manner.

3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers for goods and services.
- Sonoco's payables turnover has ranged between 6.28 and 8.03, showing consistency in managing its payment obligations to suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate sales.
- Sonoco's working capital turnover has varied significantly, with the highest turnover recorded in 2021.
- The company's ability to generate sales relative to its working capital has fluctuated over the years, reflecting changes in operational efficiency.

Overall, Sonoco Products Co. demonstrates effective management of its inventory, receivables, payables, and working capital, as reflected in its stable activity ratios over the past five years.

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Average number of days

The activity ratios of Sonoco Products Co. provide insights into how efficiently the company manages its inventory, accounts receivable, and accounts payable.

1. Days of Inventory on Hand (DOH): The DOH ratio measures the average number of days it takes for a company to sell its inventory. Sonoco Products Co. had a downward trend in its DOH from 2019 to 2021, indicating improved inventory management efficiency. However, in 2022 and 2023, the DOH increased, suggesting a potential buildup of inventory that may need to be closely monitored.

2. Days of Sales Outstanding (DSO): The DSO ratio reflects how long it takes for a company to collect its accounts receivable. Sonoco Products Co. experienced fluctuations in its DSO over the past five years, with the ratio peaking in 2021 and slightly decreasing in 2023. A higher DSO may indicate delays in collecting from customers, impacting cash flows and liquidity.

3. Number of Days of Payables: The number of days of payables ratio measures how long it takes for a company to pay its suppliers. Sonoco Products Co. managed to extend the number of days of payables from 2019 to 2022 before a slight decrease in 2023. This extension of payables can provide the company with additional working capital and improve cash flow.

Overall, while Sonoco Products Co. demonstrated improvements in managing its inventory and payables over the years, the company needs to focus on reducing its DSO to enhance cash flow and overall efficiency. Regular monitoring and adjustment of these activity ratios are essential for optimizing the company's financial performance.

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Long-term

Long-term activity ratios for Sonoco Products Co. provide insight into the efficiency of the company's utilization of its fixed and total assets to generate sales over time. The fixed asset turnover ratio, which measures how effectively the company generates sales from its investment in fixed assets, has shown a declining trend from 2019 to 2023, decreasing from 4.18 to 3.56. This indicates a decreasing ability to generate sales from its fixed assets over the years.

On the other hand, the total asset turnover ratio, which reflects the company's ability to generate sales from all its assets, has also exhibited a declining trend from 2019 to 2023, dropping from 1.05 to 0.94. This suggests that the company's overall efficiency in generating sales from its total assets has decreased over the years.

Overall, the decreasing trend in both fixed asset turnover and total asset turnover ratios for Sonoco Products Co. indicates potential inefficiencies in the company's asset utilization and sales generation capabilities. Further analysis and investigation into the underlying factors affecting these ratios would be necessary to understand the root causes of the declining efficiency trends.