Timken Company (TKR)

Short-term

Turnover ratios

Based on the provided data for Timken Company, we can analyze the activity ratios as follows:

1. Inventory Turnover:
- The inventory turnover ratio indicates how efficiently a company manages its inventory. A higher ratio is generally preferred, as it implies that the company sells its inventory quickly.
- Timken Company's inventory turnover has slightly decreased from 2.98 in 2020 to 2.62 in 2024. This decreasing trend suggests that the company may be facing challenges in efficiently managing its inventory turnover.

2. Receivables Turnover:
- The receivables turnover ratio measures how effectively a company collects payments from its customers. A higher ratio indicates that the company is efficient in collecting its receivables.
- The data provided shows that Timken Company did not have receivables turnover data available for analysis for the years 2020 to 2024.

3. Payables Turnover:
- The payables turnover ratio reflects how long a company takes to pay its suppliers. A higher ratio suggests that the company is effectively managing its payables.
- Similarly, there is no available data on payables turnover for Timken Company in the provided dataset.

4. Working Capital Turnover:
- The working capital turnover ratio measures how efficiently a company utilizes its working capital to generate sales. A higher ratio indicates better utilization of working capital.
- Timken Company's working capital turnover has shown fluctuations over the years, ranging from 3.01 in 2022 to 4.10 in 2023. This indicates variability in the company's efficiency in generating sales relative to its working capital.

In summary, the analysis of Timken Company's activity ratios suggests potential challenges in efficiently managing inventory turnover and the absence of data on receivables and payables turnover limits a comprehensive assessment of the company's operational efficiency in these areas. It is vital for the company to focus on improving inventory management practices and consider monitoring and reporting on accounts receivables and payables turnover ratios for better operational insights.

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Average number of days

The Days of Inventory on Hand (DOH) for Timken Company have shown an increasing trend over the past five years, starting at 122.67 days on December 31, 2020, and reaching 139.32 days on December 31, 2024. This indicates that the company is taking longer to sell its inventory, which may tie up capital and increase carrying costs.

The Days of Sales Outstanding (DSO) and Number of Days of Payables data are not provided, suggesting that specific information on accounts receivable collection period and accounts payable period is unavailable for analysis. These metrics are crucial for evaluating the efficiency of a company's revenue collection and payment processes.

Overall, Timken Company's increasing Days of Inventory on Hand raises concerns about inventory management efficiency and potential liquidity issues. However, without the DSO and Number of Days of Payables data, it is difficult to assess the impact on working capital turnover and overall cash flow performance. Additional information would be necessary to make a more comprehensive analysis of the company's activity ratios.

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Long-term

The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate revenue. Over the five-year period analyzed for Timken Company, the fixed asset turnover ratio has shown a generally increasing trend from 3.04 in 2020 to 3.52 in 2021, then slightly decreasing to 3.44 in 2022. However, data for 2023 and 2024 are not available.

This trend suggests that Timken Company has been able to generate more sales revenue relative to its investment in fixed assets, indicating improved efficiency in utilizing these assets for revenue generation.

Total asset turnover ratio reflects how effectively a company utilizes all its assets to generate revenue. Similarly, for Timken Company, the total asset turnover ratio has displayed an upward trajectory from 0.70 in 2020 to 0.80 in 2021, then decreasing to 0.78 in 2022, 0.73 in 2023, and further to 0.71 in 2024.

The trend in total asset turnover indicates that the company has been successful in generating more sales relative to its total assets initially, but these efficiency levels have somewhat declined in the later years. This could imply changes in the company's asset structure or possibly a slowdown in sales growth compared to asset expansion.

Overall, these long-term activity ratios suggest that Timken Company has been relatively efficient in utilizing both its fixed assets and total assets to generate revenue, though there are fluctuations in efficiency levels over the years that may require further investigation.