Terex Corporation (TEX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.54 | 3.35 | 3.59 | 3.85 | 4.16 |
| Receivables turnover | 7.97 | 9.40 | 8.07 | 7.66 | 8.07 |
| Payables turnover | 7.00 | 5.65 | 5.68 | 5.82 | 6.86 |
| Working capital turnover | 4.11 | 4.58 | 4.59 | 4.53 | 2.66 |
Terex Corporation's activity ratios provide insights into the efficiency of the company in managing its inventory, receivables, payables, and working capital.
- Inventory turnover has gradually decreased from 4.16 in 2020 to 3.54 in 2024, indicating that the company is selling its inventory at a slower pace. This could be a sign of overstocking or difficulties in selling products.
- Receivables turnover was relatively stable between 2020 and 2022, but saw a significant increase in 2023 to 9.40 before slightly dropping to 7.97 in 2024. This suggests that the company is collecting its receivables more efficiently, possibly due to improved credit policies or customer payment behavior.
- Payables turnover declined from 6.86 in 2020 to 5.65 in 2023, before increasing to 7.00 in 2024. A lower payables turnover indicates that the company is taking longer to pay its suppliers, which could strain relationships or affect credit terms.
- Working capital turnover has shown fluctuations but remained relatively stable overall, ranging from 2.66 in 2020 to 4.59 in 2022. This ratio reflects how efficiently the company is using its working capital to generate sales, with a higher turnover ratio indicating better utilization of resources.
Overall, Terex Corporation's activity ratios highlight areas where the company may need to focus on improving efficiency, such as managing inventory levels, optimizing receivables collection, and balancing payables management for better financial performance.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 103.14 | 108.90 | 101.72 | 94.88 | 87.82 |
| Days of sales outstanding (DSO) | days | 45.78 | 38.82 | 45.24 | 47.68 | 45.23 |
| Number of days of payables | days | 52.16 | 64.55 | 64.28 | 62.72 | 53.22 |
Analyzing the activity ratios of Terex Corporation based on the provided data, we observe the following trends:
1. Days of Inventory on Hand (DOH):
- The company's DOH has been increasing steadily over the years, from 87.82 days in 2020 to 103.14 days in 2024.
- This indicates that Terex is taking longer to sell its inventory or may be carrying excess inventory, which could tie up cash and impact liquidity.
2. Days of Sales Outstanding (DSO):
- The DSO fluctuated over the years, with a peak of 47.68 days in 2021 and a low of 38.82 days in 2023.
- A decrease in DSO generally signifies that the company is collecting receivables more efficiently, improving cash flow and reducing credit risks.
3. Number of Days of Payables:
- The number of days of payables has varied, with a notable increase from 53.22 days in 2020 to 62.72 days in 2021, before declining to 52.16 days in 2024.
- A shorter payment period indicates that Terex is paying its suppliers more quickly, which could suggest strong supplier relationships or cash management practices.
Overall, Terex Corporation's activity ratios reflect a need for careful monitoring of inventory levels to prevent overstocking, continued focus on efficient receivables management, and attention to optimizing payment terms with suppliers to maintain healthy working capital management.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 7.18 | 9.04 | 9.49 | 9.05 | 7.57 |
| Total asset turnover | 0.89 | 1.43 | 1.42 | 1.36 | 1.01 |
Terex Corporation's fixed asset turnover ratio has shown a positive trend over the years, increasing from 7.57 in 2020 to 9.05 in 2021 and peaking at 9.49 in 2022 before slightly decreasing to 9.04 in 2023 and further dropping to 7.18 in 2024. This signifies that the company is generating more revenue per dollar invested in fixed assets, with higher values indicating better efficiency in utilizing fixed assets to generate sales.
In contrast, Terex Corporation's total asset turnover ratio has also displayed an upward trajectory, from 1.01 in 2020 to 1.36 in 2021, further rising to 1.42 in 2022 and 1.43 in 2023 before declining to 0.89 in 2024. The total asset turnover ratio reflects the company's ability to generate revenue from its total assets, meaning a higher ratio indicates more effective utilization of assets to generate sales.
Overall, the company's long-term activity ratios demonstrate an improvement in its efficiency in utilizing both fixed assets and total assets to generate revenue in the earlier years, but a decline in 2024. It is important for Terex Corporation to further analyze the factors contributing to the fluctuations in these ratios to sustain and enhance its operational efficiency and profitability.