Steel Dynamics Inc (STLD)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	5.31	5.16	3.69	4.43	5.29
Receivables turnover	11.64	10.83	9.61	9.88	12.39
Payables turnover	—	16.03	10.30	10.74	17.53
Working capital turnover	4.20	3.97	3.94	3.20	3.22

The activity ratios of Steel Dynamics Inc. provide insight into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover:
- Steel Dynamics Inc.'s inventory turnover has ranged from 3.69 to 5.29 over the past five years.
- A higher inventory turnover ratio indicates that the company is efficiently managing its inventory by selling goods quickly.
- The declining trend from 2019 to 2021 followed by a slight increase suggests fluctuations in inventory management efficiency.

2. Receivables Turnover:
- The receivables turnover ratio has varied between 9.61 and 12.39 during the period under review.
- A higher receivables turnover ratio indicates that the company is collecting its receivables more frequently, which is a positive sign of effective credit management.
- The increasing trend from 2019 to 2023 indicates that Steel Dynamics Inc. is improving its receivables collection efficiency over time.

3. Payables Turnover:
- The payables turnover ratio has shown fluctuations, ranging from 10.19 to 17.40.
- A lower payables turnover ratio suggests that the company takes longer to pay its suppliers, potentially indicating a competitive advantage in managing working capital.
- The downward trend in payables turnover from 2019 to 2023 could indicate changes in payment terms with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio has fluctuated between 3.20 and 4.22 over the five-year period.
- A higher working capital turnover ratio indicates that the company is generating revenue more efficiently with its working capital.
- The varying trend in the working capital turnover ratio suggests fluctuations in the company's ability to generate sales with its current assets.

Overall, analyzing these activity ratios provides valuable insights into Steel Dynamics Inc.'s operational efficiency, inventory management, liquidity, and working capital utilization.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	68.73	70.77	98.79	82.39	69.01
Days of sales outstanding (DSO)	days	31.36	33.71	38.00	36.95	29.45
Number of days of payables	days	—	22.78	35.44	33.99	20.82

Activity ratios provide insight into how efficiently a company is managing its assets and operations. Let's analyze the activity ratios of Steel Dynamics Inc. based on the provided data:

1. Days of Inventory on Hand (DOH):
- The trend shows that Steel Dynamics Inc. has been able to manage its inventory levels effectively over the past five years, with the DOH ranging from 69.01 days in 2019 to 98.79 days in 2021.
- A lower DOH indicates quicker inventory turnover and better liquidity, while a higher DOH may suggest overstocking or potential obsolescence.
- The decrease in DOH from 2021 to 2023 could indicate improved inventory management and a more efficient use of working capital.

2. Days of Sales Outstanding (DSO):
- Steel Dynamics Inc.'s DSO has fluctuated over the five-year period, with a range of 29.45 days in 2019 to 38.00 days in 2021.
- A lower DSO implies faster collection of receivables and better cash flow management, while a higher DSO could indicate credit policy issues or difficulties in collecting payments.
- The decrease in DSO from 2021 to 2023 indicates a potentially more efficient accounts receivable management process, leading to quicker conversion of sales into cash.

3. Number of Days of Payables:
- The days of payables for Steel Dynamics Inc. have varied from 20.97 days in 2019 to 35.83 days in 2021.
- A higher number of days of payables suggests the company is taking longer to pay its suppliers, which can be beneficial for cash flow management.
- The increase in the number of days of payables from 2021 to 2023 may indicate a strategy to extend payment terms, potentially improving liquidity.

In conclusion, based on the trend analysis of the activity ratios for Steel Dynamics Inc., the company has shown effective management of its inventory, receivables, and payables over the past five years. The fluctuations in these ratios highlight the company's adaptability to changing market conditions and its efforts to optimize operational efficiency and working capital management.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	2.78	4.14	3.87	2.34	3.34
Total asset turnover	1.26	1.57	1.47	1.04	1.26

Steel Dynamics Inc.'s long-term activity ratios reflect its efficiency in generating sales from its fixed assets and total assets over the past five years. The fixed asset turnover ratio has shown variability, ranging from 2.34 in 2020 to 4.14 in 2022, with an average of 3.30 over the period. This suggests that, on average, the company generated $3.30 in sales for every dollar invested in fixed assets. A higher fixed asset turnover ratio indicates better utilization of fixed assets to generate sales.

On the other hand, the total asset turnover ratio has also fluctuated, from 1.04 in 2020 to 1.57 in 2022, with an average of 1.32 over the five-year period. This indicates that the company generated $1.32 in sales for every dollar invested in total assets, showing a moderate level of efficiency in asset utilization.

Comparing the two ratios, the fixed asset turnover is generally higher than the total asset turnover, indicating that the company is more efficient in utilizing its fixed assets to generate revenue compared to its total assets. Overall, the company's performance in terms of asset turnover has shown some inconsistency but remains relatively stable, suggesting satisfactory efficiency in converting assets into sales over the years.