Timken Company (TKR)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.37 | 3.30 | 3.51 | 3.71 | 3.95 |
| Receivables turnover | 6.92 | 6.34 | 6.49 | 5.95 | 6.85 |
| Payables turnover | 11.27 | 9.74 | 8.51 | 8.88 | 11.01 |
| Working capital turnover | 3.99 | 2.97 | 3.09 | 3.00 | 3.28 |
Timken Co.'s activity ratios indicate the efficiency with which the company manages its resources and operations.
1. Inventory Turnover: The trend in inventory turnover shows a slight decrease from 3.15 in 2019 to 2.65 in 2023. This implies that Timken Co. took longer to sell its inventory in 2023 compared to previous years.
2. Receivables Turnover: The receivables turnover ratio increased from 5.62 in 2019 to 5.84 in 2023, indicating that Timken Co. collected its receivables more efficiently in the latest year.
3. Payables Turnover: The trend in payables turnover suggests a fluctuating pattern, reaching a peak of 8.88 in 2023. This indicates that the company is taking more time to pay its suppliers but could also mean that it is utilizing available credit effectively.
4. Working Capital Turnover: The working capital turnover ratio has seen fluctuations over the years but showed an improving trend in 2023 at 4.10, suggesting that Timken Co. generated revenue more efficiently relative to its working capital.
Overall, while the inventory turnover has decreased, the increase in receivables turnover and improved working capital turnover indicate efficient management of receivables and working capital. The fluctuations in payables turnover may require further analysis to understand the company's strategic approach to supplier payments.
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 | 108.41 | 110.56 | 104.03 | 98.40 | 92.52 |
| Days of sales outstanding (DSO) | days | 52.78 | 57.57 | 56.27 | 61.40 | 53.31 |
| Number of days of payables | days | 32.39 | 37.49 | 42.90 | 41.10 | 33.15 |
Analysis of Timken Co.'s activity ratios reveals trends in managing inventory, receivables, and payables over the past five years.
1. Days of Inventory on Hand (DOH): The DOH has been increasing gradually over the years, indicating a longer period taken to sell inventory on hand. This may highlight potential inefficiencies in inventory management or lower demand for the company's products.
2. Days of Sales Outstanding (DSO): The DSO shows a mixed trend, fluctuating over the years. A decreasing DSO is generally positive as it indicates faster collection of receivables. However, the variability in this ratio suggests potential challenges in timely collection of sales proceeds.
3. Number of Days of Payables: The number of days of payables demonstrates a fluctuating trend, with periods of both decrease and increase. A longer number of days of payables may imply improved cash flow management but could also signal strained relationships with suppliers.
Overall, Timken Co. may consider further optimizing its inventory management practices to reduce the DOH, enhancing efforts to collect receivables promptly to lower the DSO, and balancing payables management to maintain favorable supplier relationships while optimizing cash flow.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 3.56 | 3.67 | 3.85 | 3.34 | 3.77 |
| Total asset turnover | 0.71 | 0.77 | 0.79 | 0.69 | 0.77 |
Fixed asset turnover measures how efficiently a company generates sales from its fixed assets. Timken Co.'s fixed asset turnover has been relatively stable over the past five years, ranging from 3.39 to 3.92. This indicates that the company has been consistently efficient in utilizing its fixed assets to generate revenue.
Total asset turnover, on the other hand, measures how well a company uses its total assets to generate revenue. Timken Co.'s total asset turnover has also shown a consistent trend over the past five years, ranging from 0.70 to 0.80. This indicates that the company has been effectively utilizing its total assets to generate sales.
Overall, both fixed asset turnover and total asset turnover ratios suggest that Timken Co. has been efficient in utilizing both its fixed and total assets to generate revenue, which is a positive sign of operational efficiency.