Timken Company (TKR)

Short-term

Turnover ratios

Analysis of Timken Company Activity Ratios:

1. Inventory Turnover Ratio:
- The inventory turnover ratio measures how efficiently the company is managing its inventory. Timken's inventory turnover has been gradually declining from 3.19 in March 2020 to 2.63 in December 2024. This indicates a decrease in the number of times inventory is sold and replaced during the year, potentially revealing inventory management challenges that may lead to excess stock levels.

2. Receivables Turnover Ratio:
- The receivables turnover ratio reflects how effectively the company is collecting payments from its customers. The data provided shows that Timken did not report receivables turnover values during the period under review, making it challenging to assess the efficiency of their accounts receivable management practices.

3. Payables Turnover Ratio:
- The payables turnover ratio helps in evaluating how quickly the company pays its suppliers. Similar to receivables turnover, Timken did not provide payables turnover values in the dataset, making it difficult to analyze the company's payment practices and relationships with suppliers.

4. Working Capital Turnover Ratio:
- The working capital turnover ratio measures how well the company is utilizing its working capital to generate sales. Timken's working capital turnover fluctuated over the years, with a notable increase in the ratio from 2.82 in March 2020 to 4.10 in December 2023, indicating a significant improvement in utilizing working capital efficiently to drive sales growth.

Overall, the analysis of Timken Company's activity ratios highlights fluctuations in inventory turnover and working capital turnover, while the absence of receivables and payables turnover data limits a comprehensive assessment of the company's efficiency in managing receivables and payables. Management should focus on optimizing inventory levels and enhancing working capital management practices to improve overall operational efficiency and financial performance.

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Average number of days

Based on the data provided, let's analyze the activity ratios of Timken Company:

1. Days of Inventory on Hand (DOH):
- The DOH measures the average number of days that inventory is held before being sold.
- Timken Company's DOH shows an increasing trend from 114.39 days as of March 31, 2020, to 138.54 days by December 31, 2024.
- A higher DOH value may indicate slower inventory turnover, which could lead to higher storage costs and excess inventory.

2. Days of Sales Outstanding (DSO):
- Unfortunately, there is no data available for DSO, which is used to measure the average number of days it takes for a company to collect revenue after a sale.
- Without this data, it is challenging to assess how efficiently Timken Company is collecting its accounts receivable.

3. Number of Days of Payables:
- Similar to DSO, there is no data provided for the number of days of payables, which measures how long a company takes to pay its suppliers.
- Without this information, it is difficult to evaluate the company's payment policies and relationship with its suppliers.

Overall, while the DOH ratio provides insights into Timken Company's inventory management efficiency, the lack of data for DSO and the number of days of payables limits a comprehensive assessment of the company's overall activity ratios. It's crucial for Timken Company to provide complete data for all key activity ratios to facilitate a more thorough analysis of its operational performance and efficiency.

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Long-term

The fixed asset turnover ratio for Timken Company shows fluctuations over the years, ranging from a low of 3.04 in December 31, 2020, to a high of 4.07 in March 31, 2022. This ratio indicates how efficiently the company is generating revenue from its investments in fixed assets, with a higher ratio generally being more favorable.

On the other hand, the total asset turnover ratio remained relatively stable over the same period, hovering around the 0.70 to 0.80 range. This ratio reflects the company's ability to generate sales from all its assets, including fixed and current assets.

Overall, the fixed asset turnover ratio shows more variability compared to the total asset turnover ratio, suggesting that Timken may have experienced fluctuations in its efficiency in utilizing its fixed assets to generate revenue. It is essential for the company to closely monitor these ratios to ensure optimal asset utilization and profitability in the long term.