Sonoco Products Company (SON)

Short-term

Turnover ratios

Activity ratios measure how efficiently a company manages its assets and liabilities in relation to its sales. Looking at Sonoco Products Co.'s activity ratios over the last eight quarters, we can see the following trends:

1. Inventory Turnover: Sonoco's inventory turnover has been relatively stable, ranging from 5.32 to 6.91. This indicates that the company is managing its inventory efficiently, with higher turnover ratios generally being more favorable as they suggest that inventory is being sold quickly.

2. Receivables Turnover: Sonoco's receivables turnover has fluctuated between 5.41 to 7.54. A higher turnover ratio signifies that the company is collecting its accounts receivable more quickly, which is a positive sign of effective credit management.

3. Payables Turnover: Sonoco's payables turnover has varied from 5.56 to 8.11. A higher turnover ratio in payables indicates that the company is paying its suppliers more quickly, which can sometimes be advantageous in terms of managing relationships with suppliers and optimizing cash flow.

4. Working Capital Turnover: Sonoco's working capital turnover has shown a declining trend over the quarters, from 11.74 to 6.47. A higher working capital turnover implies that the company is utilizing its working capital more efficiently to generate sales revenue. The decreasing trend may suggest a need to assess and improve the management of working capital.

Overall, Sonoco Products Co. has generally demonstrated efficient management of its assets and liabilities in relation to its sales, although there may be areas for improvement, especially in terms of working capital management. Monitoring these activity ratios over time can provide valuable insights into the company's operational efficiency and financial performance.

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Average number of days

To analyze Sonoco Products Co.'s activity ratios, we will focus on its Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables. These ratios provide insights into how efficiently the company manages its inventories, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows how many days of sales are sitting in inventory before being sold.
- Sonoco Products Co. has seen a decreasing trend in DOH from Q1 2023 to Q4 2023, indicating improved inventory management efficiency.
- A decrease in DOH implies that the company is selling its inventory at a faster rate, which can lead to lower carrying costs and potential stockouts.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect payments from customers.
- Sonoco Products Co. has shown fluctuations in DSO over the quarters, with a decrease in Q4 2023 compared to Q3 2023.
- A lower DSO suggests that the company is collecting receivables more quickly, which may improve cash flow and reduce the risk of bad debts.

3. Number of Days of Payables:
- This ratio indicates how long it takes for the company to pay its suppliers.
- Sonoco Products Co. has maintained a relatively stable trend in the Number of Days of Payables throughout the quarters.
- A longer period of payables may suggest that the company is using suppliers' financing to support its operations, while a shorter period may strain supplier relationships.

Overall, based on the activity ratios analyzed:
- Sonoco Products Co. has shown improvements in managing its inventory and collecting receivables efficiently.
- It is important for the company to maintain a balance between efficient inventory turnover, timely collections from customers, and managing payables effectively to support its working capital management and overall financial health.

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Long-term

The fixed asset turnover ratio for Sonoco Products Co. has been relatively stable over the past eight quarters, ranging from 3.56 to 4.24. This indicates that the company generates between $3.56 and $4.24 in sales for every dollar invested in fixed assets.

On the other hand, the total asset turnover ratio has also shown consistency, albeit with fluctuation, varying from 0.86 to 1.03. This ratio signifies the company's ability to generate sales from all its assets, including fixed and current assets.

Overall, both ratios suggest that Sonoco Products Co. efficiently utilizes its assets to generate revenues, with the fixed asset turnover indicating the effectiveness of the company's use of fixed assets in revenue generation and the total asset turnover demonstrating the overall efficiency of asset utilization in the revenue-generating process.